A new federal tax deduction allows many consumers to reduce their taxable income by deducting interest paid on qualifying car loans. This benefit is effective for tax years 2025 through 2028 and is designed to make the purchase of new, U.S. assembled personal vehicles more affordable. Below is a clear overview of how the deduction works and what borrowers need to know.
Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)
A qualified vehicle must meet both the vehicle type requirement and the final assembly requirement.
Eligible vehicle types include:
The vehicle must have a gross vehicle weight rating (GVWR) under 14,000 pounds.
Final assembly in the United States:
The vehicle must undergo final assembly in the U.S. How do you know if your vehicle was assembled in the U.S.? This information appears on the vehicle information label at the dealership. You may also confirm the plant of manufacture by checking the VIN:
Given the varying nature of tax situations and the technical requirements of this new deduction, you should consult a tax professional before claiming it. They can confirm your eligibility and ensure accurate reporting. This information is for educational purposes only and does not constitute tax advice.
Find more info on the IRS website
If you have any questions about your auto loan or need assistance locating the year-to-date interest amount on your statement, our team is ready to help. Contact us online, by phone (814) 825-2436, or visit any branch office.
