Big Beautiful Bill Offers Car Buyers Tax Relief with Deduction of Up to $10,000 in Loan Interest

The One Big Beautiful Bill Act, signed into law by President Trump, provides a new tax deduction for car buyers. Starting in 2025, individuals can deduct up to $10,000 in qualified passenger vehicle loan interest. The deduction applies to new cars assembled in the US, weighing less than 14,000 pounds, and purchased for personal use. However, used cars, leased vehicles, and those assembled outside the US are excluded. The tax break has income limitations and expires in 2028.

The One Big Beautiful Bill Act, signed into law by President Trump, introduces a new tax deduction for car buyers. Starting in 2025, individuals can deduct up to $10,000 in qualified passenger vehicle loan interest. This tax break applies to new cars assembled in the United States, weighing less than 14,000 pounds, and purchased for personal use. However, used cars, leased vehicles, and those assembled outside the U.S. are excluded. The tax break has income limitations and expires in 2028.

To qualify for the deduction, the vehicle must be new and assembled in the U.S. The loan must be a standard and secured auto loan, with the vehicle identification number (VIN) reported on tax returns. The deduction does not need to be itemized [1].

The income cap for the deduction is $100,000 for single filers and $200,000 for joint filers. For those earning above these thresholds, the deduction is reduced by $200 for every $1,000 over the limit. This means that individuals earning over $150,000 and joint filers earning over $250,000 will not benefit from the deduction [1].

The exclusion of used vehicles and imported models could disadvantage lower-income buyers who often opt for used or affordable imported cars. The requirement for final assembly in the U.S. could benefit American manufacturing and jobs, particularly companies like Ford, General Motors, Honda, Toyota, BMW, and Tesla, which have significant U.S. production facilities [1].

The bill also ends federal tax credits for electric vehicles (EVs), which could potentially lead to a decrease in EV sales and an increase in the price of EVs. Additionally, the bill reduces funding for the Consumer Financial Protection Bureau, which may lead to less enforcement of predatory auto loans [2].

In conclusion, the One Big Beautiful Bill Act provides a new tax deduction for car buyers, but it comes with several conditions and limitations. The bill also has significant implications for the automotive industry and consumers.

References:
[1] https://www.foxbusiness.com/retail/big-beautiful-bill-includes-car-loan-interest-tax-deduction-do-you-qualify
[2] https://www.motortrend.com/news/how-the-one-big-beautiful-bill-will-affect-car-buying-and-ownership