Thinking about buying a new car? A new federal tax deduction could help you save money.
For tax years 2025 through 2028, eligible taxpayers may deduct up to $10,000 annually in interest paid on loans used to purchase qualifying new vehicles for personal use.
Who Qualifies?
- New vehicles only: Used vehicles do not qualify.
- Made in America: The vehicle’s final assembly must occur in the United States.
- Eligible vehicles: Cars, SUVs, minivans, vans, pickup trucks, and motorcycles that meet the law’s requirements.
- Loan requirements: The loan must have originated after December 31, 2024, and meet certain requirements.
- No need to itemize: The deduction is available whether you itemize deductions or take the standard deduction.
Income Limits Apply
The deduction begins to phase out when modified adjusted gross income exceeds:
- $100,000 for single filers
- $200,000 for married couples filing jointly
The deduction is reduced by $200 for each $1,000 (or fraction thereof) above these thresholds.
Before You Buy
Not every new vehicle qualifies, even if it’s an American brand. Check the vehicle’s final assembly location using its Vehicle Identification Number (VIN) before purchasing.
The Bottom Line: If you’re considering financing a new vehicle, this temporary tax break could provide meaningful savings. Be sure to confirm eligibility before making your purchase.