What changed in 2025?

• New deduction for interest that you pay on a qualifying vehicle loan.
• Maximum annual deduction is $10,000.
• You can claim it even if you take the standard deduction.

Verify final assembly in the U.S.

• Use the NHTSA VIN Decoder to confirm final assembly location. https://www.nhtsa.gov/vin-decoder
• Have your 17-character VIN ready.
• You can also check the dealer window label or purchase paperwork.

What counts as qualified interest?
You can claim this deduction if:

• The loan originated on or after January 1, 2025.
• The loan is secured by a first lien on the vehicle.
• The vehicle was purchased new and first used by you.
• The vehicle is for personal use.
• Interest paid on a later refinance of a qualifying loan generally remains eligible for the refinanced amount.

Which vehicles qualify?

• Cars, minivans, vans, SUVs, pickup trucks, and motorcycles.
• Gross vehicle weight rating under 14,000 pounds.
• Final assembly occurred in the United States.

How to claim

• Gather your VIN, lender name, and total interest you paid for the year.
• Enter these details when prompted in the product.
• Keep loan statements and your purchase documents with your records.

What does not qualify?

• Leases.
• Used vehicles.
• Loans that began before 2025.
• Loans that are not secured by the vehicle.
• Vehicles that are used for business or commercial purposes.
• Fees that are not interest.
• Double claiming the same interest across co-borrowers.

Income limits

• Deduction phases out when modified AGI is over $100,000 single or head of household, or $200,000 married filing jointly.
• The deduction may phase out completely at higher incomes.

Examples

• You paid $2,400 of interest in 2025 and meet all criteria. You can deduct $2,400, subject to income limits.
• You paid $12,300 of interest in 2025 and meet all criteria. Your deduction is capped at $10,000, subject to income limits.

Expiration

• Applies through tax year 2028, unless extended.

Related Links

• New Tax Bill (2025)

NOTE: This new tax bill was signed into law on July 4, 2025. The One Big Beautiful Bill Act (OBBB or OB3) is now also being referred to by lawmakers as the Working Families Tax Cut Act. You may see one or both names used, but they refer to the same set of tax changes.