The IRS has issued guidance for a new tax deduction allowing eligible taxpayers to write off up to $10,000 in interest paid on auto loans for new personal vehicles assembled in the United States. The provision, part of the One Big Beautiful Bill Act (OBBBA) enacted in 2025, applies to loans taken out after December 31, 2024.
The deduction covers interest on car loans used to purchase new personal vehicles, excluding leases and business or commercial vehicles. Taxpayers can claim the deduction regardless of whether they itemize or use the standard deduction. It is subject to income limits, phasing out for single filers with modified adjusted gross income (MAGI) above $100,000 and joint filers over $200,000.
To claim the deduction, taxpayers must include the vehicle’s identification number (VIN) on their tax returns to verify that the vehicle’s final assembly occurred in the U.S. Verification can be done through the dealership’s vehicle label, the VIN itself, or the National Highway Traffic Safety Administration’s VIN Decoder.
If a qualifying auto loan is refinanced, interest on the refinanced loan generally remains eligible for the deduction. The tax break is retroactive to the 2025 tax year and is scheduled to expire after 2028 unless Congress extends it.
This tax provision is one of several temporary measures included in the OBBBA to comply with congressional reconciliation rules and offers potential savings for car buyers financing new U.S.-assembled vehicles.
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