Auto financing just got a patriotic perk, thanks to the newly signed “One Big, Beautiful Bill Act” (OBBBA). If you’re considering buying a car in the next few years, this legislation could put real money back in your pocket — but only if your purchase meets some key criteria. Here’s what drivers (and borrowers) should know:
What’s the Tax Break?
Beginning with vehicles purchased after December 31, 2024, eligible borrowers can deduct up to $10,000 per year in auto loan interest — no itemizing required.
This deduction will apply annually from 2025 through 2028, giving qualified buyers a multi-year opportunity to offset borrowing costs.
Who’s Eligible?
To qualify for the deduction:
- You must have purchased a new vehicle
- It must be assembled in the United States (sorry, popular imports like Toyota or Hyundai don’t make the cut)
- The vehicle must not be a trailer, camper, or ATV
There’s also an income cap:
- Individuals earning over $100,000 and couples earning over $200,000 will not qualify
Why It Matters
With auto loan interest rates averaging around 8.64% nationally, many borrowers are shelling out nearly $187 a month in interest alone—that’s over $2,200 each year. The good news? Over time, up to $10,000 of that interest could be tax-deductible. Explore our current loan rates and use our loan calculator to estimate how much you could potentially deduct this year.
Other Changes to Watch
OBBBA also shortens the timeline for claiming the pre-owned electric/“clean” vehicle tax credit — ending it just 90 days after the law’s enactment on July 4, 2025. So buyers exploring sustainable options may need to act fast.
This information is provided for general purposes only and should not be considered tax advice. Please consult with a qualified tax preparer or financial advisor to determine how this deduction may apply to your personal circumstances.
