Auto Loan Interest Deduction under the OBBBA: Key Details for 2025–2028
Quick Overview: The One Big Beautiful Bill Act (H.R. 1) introduces a new Auto Loan Interest Deduction. From 2025 to 2028, eligible taxpayers can deduct up to $10,000 of interest paid on qualified auto loans.
✅ Who Qualifies?
- Income Limits: Full benefit for single filers with MAGI up to $100,000 and joint filers up to $200,000.
- Phase-Out: Deduction phases out by $200 for every $1,000 of MAGI over the limit.
- Fully eliminated at MAGI $150,000 (single) and $250,000 (joint).
🚗 What Vehicles Qualify?
- New vehicles only — used cars and salvage titles do not qualify.
- Final assembly must be in the United States ("Made in America" rule).
- GVWR must be under 14,000 lbs.
- Fleet sales, leased vehicles, and purely commercial vehicles are excluded.
💡 Mixed-Use Vehicles
If you use a vehicle for both business and personal purposes:
- Deduct the business-use portion on Schedule C.
- Deduct the personal-use portion under the OBBBA as an above-the-line deduction.
⚠️ Key Tax Planning Tip
The deduction reduces AGI but is also based on AGI — a "circular" rule. Expect IRS guidance to clarify that you should calculate phase-out using a preliminary AGI first.
📅 Effective Period
You can claim this deduction for tax years 2025, 2026, 2027, and 2028. It expires after 2028 unless extended.
🔗 Additional Resources
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