Effective from January 1, 2025, through December 31, 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. Lease payments do not qualify.
The maximum annual deduction is $10,000.
The deduction phases out for taxpayers with gross income over $100,000 ($200,000 for joint filers).
The interest must be on a loan taken after December 31, 2024, used to purchase new vehicles (used cars do not qualify), for a personal use vehicle, and secured by a lien on the car.
A qualified vehicle is a car, minivan, van, SUV, pick-up truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds that has undergone final assembly in the United States.
The final assembly location will be listed on the vehicle information label attached to each vehicle on a dealer’s premises. Alternatively, taxpayers may rely on the vehicle’s place of manufacture as reported in the vehicle identification number (VIN) to determine if a car has undergone final assembly in the United States.
The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) provides information on the plant of manufacture. Taxpayers can follow the instructions on that website to determine if the car’s place of manufacture was in the United States.
Lenders or other recipients of qualified interest must file information returns with the IRS and furnish taxpayers with statements showing the total interest amount received during the taxable year.
If you would like a consultation about how changes to the 2025 taxes affects your return, feel free to call us at (631-585-9698.