Effective for tax years 2025 through 2028, eligible taxpayers may be able to deduct up to $10,000 of interest paid or accrued on vehicle loans on their federal income taxes. Review the criteria and consult a tax professional to understand if you may qualify.
Key tax deduction details
The One Big Beautiful Bill Act (OBBBA), signed into law in July of 2025, includes hundreds of provisions, from tax legislation to funding for federal agencies. One new update under the OBBBA is a tax deduction for interest paid or accrued on vehicle loans for eligible taxpayers for tax years 2025 through 2028. Loans must have an origination date after December 31, 2024, and be used to purchase new vehicles for personal use. Additionally, the final assembly of the vehicles must have occurred in the United States.
There is a maximum annual deduction of $10,000 and the amount you may be able to claim is limited by your modified adjusted gross income, or MAGI. If you qualify and your MAGI is over $100,000 as a single filer or over $200,000 as joint filers, you will not be able to claim the full deduction.
Note that this deduction does not include payments on auto leases.
Understand your eligibility
Review these questions to understand if you meet the qualifications for the deduction. If your answers are “yes,” you may be eligible.
- Was your vehicle loan originated after December 31, 2024, and secured by a lien on the vehicle?
- Is your vehicle a car, minivan, van, SUV, pick-up truck or motorcycle with a gross vehicle weight rating of less than 14,000 pounds?
- Is your vehicle new and purchased for personal use?
- Did your vehicle undergo final assembly in the U.S.? You can check this by using the National Highway Traffic Safety Administration’s VIN Decoder. If you’re claiming the deduction, you will need your VIN handy for your tax return.
Find auto loan interest information
If you financed the purchase of a new vehicle through U.S. Bank after December 31, 2024, you will receive a letter in January with a summary of the interest and late fees paid on that account. Retain the information you receive for your tax records and consult a licensed tax advisor or preparer to determine whether your specific loan and interest payments qualify for the deduction.
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