Tax Talk-Feb 2026
🚗 New Car Loan Interest Deduction (2025–2028): What You Need to Know
By Eric G. Allred, E.A.
Beginning in 2025, a new federal tax deduction allows qualifying taxpayers to deduct up to $10,000 per year of interest paid on loans for certain new, U.S.-assembled vehicles. This provision, enacted under the One Big Beautiful Bill Act, is temporary and currently scheduled to apply for tax years 2025 through 2028.
Here’s what it means — and what it doesn’t, including some useful tax tips.
✅ What the New Deduction Allows
From 2025–2028, taxpayers may deduct up to $10,000 of interest paid annually on a loan used to purchase a qualifying new vehicle for personal use. Key features include:
- Applies to new vehicles only
- Vehicle must be assembled in the United States
- Deduction is available even if you take the standard deduction
- Loan must originate after December 31, 2024
- Applies to personal (non-business) vehicles
This is the first time federal tax law has allowed a broad deduction for personal auto loan interest.
🚘 Which Vehicles Qualify?
To qualify, the vehicle must meet the following criteria:
- ✔ The vehicle must be new (not used)
- ✔ It must be for personal use
- ✔ It must be finally assembled in the United States
Qualified vehicle types include:
- Passenger cars
- SUVs
- Pickup trucks
- Vans
- Minivans
- Motorcycles
Vehicles that do not qualify:
- Used vehicles
- Leased vehicles
- Heavy commercial vehicles over 14,000 lbs
- Vehicles assembled outside the U.S.
🔎 How to Confirm U.S. Assembly
Many people assume an “American brand” automatically qualifies. That is not correct; the final assembly location determines eligibility. You can confirm this by checking the VIN (Vehicle Identification Number):
If the VIN begins with:
- 1
- 4
- 5
The vehicle was assembled in the United States.
If it begins with:
- 2 (Canada)
- 3 (Mexico)
- J (Japan)
- K (Korea)
- W (Germany)
- etc.
It does not qualify for this deduction. The VIN can be found on:
- The dashboard (driver’s side)
- The door jamb
- Purchase documents
- Financing paperwork
💰 Income Limitations
The deduction phases out based on modified adjusted gross income (MAGI):
- Single filers: Phase-out begins around $100,000
- Married filing jointly: Phase-out begins around $200,000
Higher-income taxpayers may see the deduction reduced or eliminated.
📊 How Much Will You Actually Save?
It’s important to understand:
You are deducting interest paid, not the total car payment. Most auto loans will not generate $10,000 of interest in a single year unless the loan amount and interest rate are relatively high. For example:
If you paid $4,000 in interest during the year, that is the maximum potential deduction — not $10,000.
The tax savings equals:
Interest Deduction × Your Marginal Tax Rate
This is a deduction, not a credit.
⚠️ What This Is Not
- It is not permanent (currently expires after 2028).
- It is not available for used vehicles.
- It is not a business vehicle deduction (business vehicles follow different rules).
- It is not based on where the brand is headquartered.
📌 Strategic Considerations
Before purchasing a vehicle solely for tax reasons, consider these frequently asked questions:
- Will you qualify under income limits?
- How much interest will actually be paid?
- Would a business-use structure be more advantageous?
- Is standard mileage vs. actual expense method more beneficial?
- Does Section 179 or bonus depreciation apply in your situation?
Tax strategy should drive decisions — not marketing headlines.
🧾 Final Thoughts
This new deduction can provide meaningful savings for qualifying taxpayers purchasing a new U.S.-assembled vehicle between 2025 and 2028. However, eligibility and benefit amounts depend heavily on:
- Income level
- Loan structure
- Interest rate
- Vehicle assembly location
If you are considering purchasing a vehicle and would like to evaluate the tax implications before signing financing documents, I recommend reviewing the numbers in advance. For anyone interested in further exploring these topics, consider downloading our automotive e-book for more insights.
Eric G. Allred, E.A.
Tax & Business Advisory Services
Serving Individuals and Small Businesses
For strategic tax planning or year-round advisory support, contact my office to schedule a consultation.
Tax Talk-Feb 2026
Worker Misclassification, Missing W-2s, and 1099 Problems — What You Need to Know
By Eric G. Allred, E.A.
Beginning in 2025, a new federal tax deduction allows qualifying taxpayers to deduct up to $10,000 per year of interest paid on loans for certain new, U.S.-assembled vehicles. This provision, enacted under the One Big Beautiful Bill Act, is temporary and currently scheduled to apply for tax years 2025 through 2028.
Here’s what it means — and what it doesn’t, including some useful tax tips.
✅ What the New Deduction Allows
From 2025–2028, taxpayers may deduct up to $10,000 of interest paid annually on a loan used to purchase a qualifying new vehicle for personal use. Key features include:
- Applies to new vehicles only
- Vehicle must be assembled in the United States
- Deduction is available even if you take the standard deduction
- Loan must originate after December 31, 2024
- Applies to personal (non-business) vehicles
This is the first time federal tax law has allowed a broad deduction for personal auto loan interest.
🚘 Which Vehicles Qualify?
To qualify, the vehicle must meet the following criteria:
- ✔ The vehicle must be new (not used)
- ✔ It must be for personal use
- ✔ It must be finally assembled in the United States
Qualified vehicle types include:
- Passenger cars
- SUVs
- Pickup trucks
- Vans
- Minivans
- Motorcycles
Vehicles that do not qualify:
- Used vehicles
- Leased vehicles
- Heavy commercial vehicles over 14,000 lbs
- Vehicles assembled outside the U.S.
🔎 How to Confirm U.S. Assembly
Many people assume an “American brand” automatically qualifies. That is not correct; the final assembly location determines eligibility. You can confirm this by checking the VIN (Vehicle Identification Number):
If the VIN begins with:
- 1
- 4
- 5
The vehicle was assembled in the United States.
If it begins with:
- 2 (Canada)
- 3 (Mexico)
- J (Japan)
- K (Korea)
- W (Germany)
- etc.
It does not qualify for this deduction. The VIN can be found on:
- The dashboard (driver’s side)
- The door jamb
- Purchase documents
- Financing paperwork
💰 Income Limitations
The deduction phases out based on modified adjusted gross income (MAGI):
- Single filers: Phase-out begins around $100,000
- Married filing jointly: Phase-out begins around $200,000
Higher-income taxpayers may see the deduction reduced or eliminated.
📊 How Much Will You Actually Save?
It’s important to understand:
You are deducting interest paid, not the total car payment. Most auto loans will not generate $10,000 of interest in a single year unless the loan amount and interest rate are relatively high. For example:
If you paid $4,000 in interest during the year, that is the maximum potential deduction — not $10,000.
The tax savings equals:
Interest Deduction × Your Marginal Tax Rate
This is a deduction, not a credit.
⚠️ What This Is Not
- It is not permanent (currently expires after 2028).
- It is not available for used vehicles.
- It is not a business vehicle deduction (business vehicles follow different rules).
- It is not based on where the brand is headquartered.
📌 Strategic Considerations
Before purchasing a vehicle solely for tax reasons, consider these frequently asked questions:
- Will you qualify under income limits?
- How much interest will actually be paid?
- Would a business-use structure be more advantageous?
- Is standard mileage vs. actual expense method more beneficial?
- Does Section 179 or bonus depreciation apply in your situation?
Tax strategy should drive decisions — not marketing headlines.
🧾 Final Thoughts
This new deduction can provide meaningful savings for qualifying taxpayers purchasing a new U.S.-assembled vehicle between 2025 and 2028. However, eligibility and benefit amounts depend heavily on:
- Income level
- Loan structure
- Interest rate
- Vehicle assembly location
If you are considering purchasing a vehicle and would like to evaluate the tax implications before signing financing documents, I recommend reviewing the numbers in advance. For anyone interested in further exploring these topics, consider downloading our automotive e-book for more insights.
Eric G. Allred, E.A.
Tax & Business Advisory Services
Serving Individuals and Small Businesses
For strategic tax planning or year-round advisory support, contact my office to schedule a consultation.
Tax Talk
There's talk of Trump ending the Income Tax
By Eric G. Allred, E.A.
Beginning in 2025, a new federal tax deduction allows qualifying taxpayers to deduct up to $10,000 per year of interest paid on loans for certain new, U.S.-assembled vehicles. This provision, enacted under the One Big Beautiful Bill Act, is temporary and currently scheduled to apply for tax years 2025 through 2028.
Here’s what it means — and what it doesn’t, including some useful tax tips.
✅ What the New Deduction Allows
From 2025–2028, taxpayers may deduct up to $10,000 of interest paid annually on a loan used to purchase a qualifying new vehicle for personal use. Key features include:
- Applies to new vehicles only
- Vehicle must be assembled in the United States
- Deduction is available even if you take the standard deduction
- Loan must originate after December 31, 2024
- Applies to personal (non-business) vehicles
This is the first time federal tax law has allowed a broad deduction for personal auto loan interest.
🚘 Which Vehicles Qualify?
To qualify, the vehicle must meet the following criteria:
- ✔ The vehicle must be new (not used)
- ✔ It must be for personal use
- ✔ It must be finally assembled in the United States
Qualified vehicle types include:
- Passenger cars
- SUVs
- Pickup trucks
- Vans
- Minivans
- Motorcycles
Vehicles that do not qualify:
- Used vehicles
- Leased vehicles
- Heavy commercial vehicles over 14,000 lbs
- Vehicles assembled outside the U.S.
🔎 How to Confirm U.S. Assembly
Many people assume an “American brand” automatically qualifies. That is not correct; the final assembly location determines eligibility. You can confirm this by checking the VIN (Vehicle Identification Number):
If the VIN begins with:
- 1
- 4
- 5
The vehicle was assembled in the United States.
If it begins with:
- 2 (Canada)
- 3 (Mexico)
- J (Japan)
- K (Korea)
- W (Germany)
- etc.
It does not qualify for this deduction. The VIN can be found on:
- The dashboard (driver’s side)
- The door jamb
- Purchase documents
- Financing paperwork
💰 Income Limitations
The deduction phases out based on modified adjusted gross income (MAGI):
- Single filers: Phase-out begins around $100,000
- Married filing jointly: Phase-out begins around $200,000
Higher-income taxpayers may see the deduction reduced or eliminated.
📊 How Much Will You Actually Save?
It’s important to understand:
You are deducting interest paid, not the total car payment. Most auto loans will not generate $10,000 of interest in a single year unless the loan amount and interest rate are relatively high. For example:
If you paid $4,000 in interest during the year, that is the maximum potential deduction — not $10,000.
The tax savings equals:
Interest Deduction × Your Marginal Tax Rate
This is a deduction, not a credit.
⚠️ What This Is Not
- It is not permanent (currently expires after 2028).
- It is not available for used vehicles.
- It is not a business vehicle deduction (business vehicles follow different rules).
- It is not based on where the brand is headquartered.
📌 Strategic Considerations
Before purchasing a vehicle solely for tax reasons, consider these frequently asked questions:
- Will you qualify under income limits?
- How much interest will actually be paid?
- Would a business-use structure be more advantageous?
- Is standard mileage vs. actual expense method more beneficial?
- Does Section 179 or bonus depreciation apply in your situation?
Tax strategy should drive decisions — not marketing headlines.
🧾 Final Thoughts
This new deduction can provide meaningful savings for qualifying taxpayers purchasing a new U.S.-assembled vehicle between 2025 and 2028. However, eligibility and benefit amounts depend heavily on:
- Income level
- Loan structure
- Interest rate
- Vehicle assembly location
If you are considering purchasing a vehicle and would like to evaluate the tax implications before signing financing documents, I recommend reviewing the numbers in advance. For anyone interested in further exploring these topics, consider downloading our automotive e-book for more insights.
Eric G. Allred, E.A.
Tax & Business Advisory Services
Serving Individuals and Small Businesses
For strategic tax planning or year-round advisory support, contact my office to schedule a consultation.
