Not Everyone Can Claim the New Car Loan Interest Deduction: What You Need To Know

Core Insights - A new tax credit in the "One Big, Beautiful Bill" allows taxpayers to deduct part of the interest paid on a car loan from their 2025 taxes, with a maximum deduction of $10,000 [2][8] Vehicle Eligibility - Only new vehicles that underwent final assembly in the United States qualify for the deduction, with approximately 30% of vehicle models sold in the U.S. in 2025 meeting this criterion [3][5] - Qualified vehicles include cars, minivans, vans, SUVs, pick-up trucks, or motorcycles weighing less than 14,000 pounds and must be for personal use [9] Taxpayer Eligibility - The deduction is available to both itemizing and non-itemizing taxpayers, with income limits set at $150,000 for single filers and $250,000 for joint filers [8] - The deduction phases out for single taxpayers with a modified adjusted gross income (MAGI) of $100,000, and completely phases out at $150,000; for joint filers, it begins to phase out at $200,000 and completely phases out at $250,000 [9] Additional Requirements - The car loan must originate after December 31, 2024, and be secured by a lien on the vehicle; loans for used vehicles do not qualify [9] - Taxpayers can use the National Highway Traffic Safety Administration's VIN Decoder to verify where a car was finally assembled, which is necessary for claiming the deduction [4]