The One Big Beautiful Bill Act, enacted on July 4, 2025 as Public Law 119-21, introduced a wide range of changes that will impact tax returns for the 2025 tax year and beyond.
For tax years 2025 through 2028, up to $10,000 in interest paid on qualifying car loans can be taken as a below the line deduction. The deductible amount is calculated in Schedule 1-A Part IV.
To be eligible for the deduction, the loan must be used for the purchase of a new vehicle after December 31, 2024. The vehicle must be for personal use, not business, and it cannot be a used vehicle or a leased vehicle. Additionally, the vehicle's final assembly must be in the U.S.
A VIN Decoder can be used to verify manufacturing information.
This deduction is gradually phased out for taxpayers with a Modified Adjusted Gross Income (MAGI) over the threshold for the year. (MAGI is the AGI with any foreign-earned income exclusion added back.) The deduction is reduced by $200 for every $1,000 that the MAGI is over the threshold.
The following thresholds are in effect for the 2025 tax year:
- $100,000 for single filers
- $200,000 for Married Filing Joint
TaxSlayer Pro strives to make the information on this page timely and accurate but makes no promise or guarantee about the timeliness, accuracy, or completeness of the contents of this page. This is general information and is not intended to be tax advice. You are encouraged to also review the underlying federal resources and publications.