Buying a car? Deduct up to $10,000 in interest under new tax law

Series Episode 09 | One Big Beautiful Bill

Tax relief for new auto buyers: Deduct up to $10K in interest

The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduces a new federal tax deduction for interest paid on new personal-use vehicle loans, up to $10,000 per year from 2025 through.
Eligible vehicles must meet all of the following:

Be new, used for personal purposes, assembled in the U.S., and purchased between 2025–2028

Loan interest must be secured by the vehicle, reported as a first lien.
The deduction is above-the-line, so you can claim it even if you take the standard deduction.

The benefit phases out for higher incomes

Full deduction available for individuals earning up to $100,000 or couples up to $200,000

For each $1,000 over those thresholds, the deduction is reduced by $200.

Example
If you finance a $40,000 vehicle and pay $3,500 in interest, that entire $3,500 may be deductible, lowering your taxable income and potentially saving you hundreds in federal taxes.

This deduction is a rare opportunity to reduce your personal tax liability on a common expense, especially for new buyers in states with high vehicle costs.

Want to know if you qualify and how much you could save?
Schedule a consultation with Leader CPA today.