Car Loan Interest Deduction for 2025–2028

​​The One Big Beautiful Bill Act (OBBBA) introduces a new deduction for personal vehicle loan interest, creating a planning opportunity for households purchasing qualifying U.S. built vehicles. For the first time, certain personal auto loans may generate a federal deduction independent of business use rules.​

 

​This page outlines eligibility requirements, income limitations, deduction mechanics, and planning considerations for 2025 through 2028.

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New Deduction for Personal Vehicle Loan Interest

​Under OBBBA, taxpayers may deduct up to $10,000 of interest paid on qualifying auto loans for vehicles purchased and placed in service between 2025 and 2028. The deduction applies only to personal-use vehicles manufactured in the United States.

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This represents a significant change from prior law, where personal vehicle loan interest has been nondeductible since the late 1980s.

 

​Potential Tax Savings​

​The maximum deduction can generate meaningful tax savings depending on filing status and marginal tax bracket.​

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Example:  ​Joint filers in the 32% bracket may save up to $3,200 when the full interest cap is utilized.

Because the deduction is capped, accurate interest reporting and year-end documentation are essential.

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Income Limits and Eligibility Requirements

​​Eligibility for the deduction is subject to income limitations. For joint filers, the deduction phases out as Modified Adjusted Gross Income (MAGI) moves from approximately $200,000 to $250,000.

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Other filing statuses will follow proportional limits once final Internal Revenue Services (IRS) guidance is issued.

Additional rules:

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• Applies only to personal-use vehicles.

• Business-use automobiles remain subject to standard business auto rules, depreciation limits, and Section 280A interaction.

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Vehicle Qualification Requirements

​​A qualifying vehicle must meet the following conditions:

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• Manufactured in the United States

• Purchased and financed between 2025 and 2028

• Contains a VIN that meets federal qualification criteria

• Registered and used for personal rather than business purposes.

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Proper documentation must be retained to verify vehicle origin, financing terms, and interest paid.

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Planning Considerations Under OBBBA

​​Several planning factors influence the timing and value of this new deduction:

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Interest Allocation
Only loan interest is deductible. Principal repayment is not.

MAGI Management
Taxpayers near the $200,000–$250,000 phaseout range may require income planning to preserve eligibility.

VIN Verification
Confirming U.S. manufacturing through VIN decoding helps ensure qualification before purchase.

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Interaction With Itemized Deductions

​​Taxpayers who benefit from higher itemized deductions (including the expanded SALT deduction) may see additional value from this provision.

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Request an Auto Loan Deduction Review

​​A technical review of vehicle eligibility, loan terms, MAGI thresholds, and deduction interactions supports accurate planning under OBBBA.

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A review includes:

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• VIN eligibility confirmation.

• Interest calculation and deduction timing.

• MAGI phaseout exposure analysis.

• Interaction with itemized deductions versus the standard deduction.

• Documentation requirements for year-end filing.

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Submit the form below to begin a detailed assessment and determine potential savings available under the car loan interest deduction.

 

Optimize Auto Loan Interest Deductions Under OBBBA

The new $10,000 auto loan interest deduction offers a rare opportunity for personal vehicle owners. A structured review identifies eligibility, income limitations, and documentation requirements necessary for accurate deduction planning.

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​Provide income and vehicle details to evaluate eligibility for the $10,000 interest deduction, confirm VIN compliance, and calculate potential savings under OBBBA.​​​​​​​​​​