New 2025 Auto Loan Interest Deduction

The Big Beautiful Bill Act: A Rare Tax Break for Car Buyers

Truth is, Congress doesn’t usually do car buyers many favors. But the One Big Beautiful Bill Act—signed into law July 4, 2025—includes something exceedingly rare: a tax deduction that puts real money back in your pocket if you finance a qualifying new vehicle. That’s almost revolutionary.

Here’s what the deduction is, how it works, who qualifies, and how to take full advantage. No fluff, no tax jargon, just the key details and how we can help at GMC of Riverfront Park.

What Is the Auto-Loan Interest Deduction?

Here are the facts: Tucked into Section 70203 of the One Big Beautiful Bill Act is a provision allowing Americans to deduct up to $10,000 per year in interest paid on a qualifying auto loan. Unlike typical deductions tied to business vehicles, this one applies to personal-use vehicles. An almost unheard of major shift in IRS policy.

Even better, it’s an above-the-line deduction, which means you can claim it even if you don’t itemize. It applies to tax years 2025 through 2028, and for most buyers, it won’t require much extra paperwork. Just the right car, the right loan, and a bit of upfront awareness.

What Vehicles and Loans Qualify?

That’s great. Let’s go car shopping. Not so fast! Not every car, or loan, makes the cut. The rules are strict but simple.

Vehicle Requirements

• Must be new: You must be the first owner. Used vehicles are completely excluded.
• Personal use only: No commercial fleets or business deductions allowed.
• U.S. Assembly: The vehicle must be assembled in the United States.
• Weight Limit: Must be under 14,000 lbs gross vehicle weight.

Loan Requirements

• Originated after December 31, 2024: The loan must be new.
• Secured by a lien: The loan must be secured by the vehicle itself.
• Leases excluded: This deduction applies only to purchase loans, not leases.

Do You Qualify & How Much Could You Save?

Income Eligibility

But again, this is the government. Nothing is that easy or straightforward! Assuming the vehicle and loan qualify, you’re not done qualifying. Your eligibility then depends on your income. The deduction begins to phase out at:

• $100,000 MAGI for single filers
• $200,000 MAGI for married couples filing jointly

Potential Savings Example

Here’s the cold, hard math: This isn’t a rebate or a credit, it’s a reduction in taxable income. But the savings are still real. Let’s say you pay $4,000 in interest in 2025. If you’re in the 24% federal bracket, that deduction lowers your tax bill by about $960.

In a high-interest market, or if you’re financing a large vehicle, those numbers add up quickly. Be smart and plan strategically; the deduction can make a big dent in the cost of borrowing.

How to Set Yourself Up to Benefit

Great, so how do I get the credit? Plan before you buy. You need to confirm three things:

1. The vehicle qualifies (new, personal use, U.S.-assembled).
2. The loan qualifies (secured, post-2024 start date).
3. Your income level allows you to take the deduction.

Careful though! Don’t assume every dealer, or every lender, has your interests at heart. They’re focused on the sale and the commission. It’s up to you! You need to be the one asking the right questions.

Prepare yourself: Check the VIN for assembly info. Confirm the loan structure and lien. Ask for interest estimates up front. And keep all documentation in one place, including lender statements and a copy of the loan agreement. Come tax time, you’ll need clear proof of interest paid.

How GMC of Riverfront Park Can Help

Here’s where we come in.

At GMC of Riverfront Park, we’ve already carefully reviewed the cars on our lot to identify which vehicles meet the new IRS requirements for final assembly and weight. When you walk in, we will work with you to find out if you qualify individually.

And of course, our finance team is briefed on the new law. We only work with lenders who can properly structure loans to meet the deduction requirements. And issue the documentation you’ll need at tax time.

We can’t file your taxes, but we can make sure you don’t leave money on the table just because no one told you the rules.

Popular Qualifying Models

GMC Sierra

Built in the USA, the Sierra is a powerful and capable full-size pickup that qualifies for the deduction.

Explore Sierra

GMC Acadia

This sophisticated midsize SUV offers premium comfort and technology, and is assembled in the U.S.

Explore Acadia

GMC Terrain

A compact SUV perfect for city driving, the Terrain is a great option that meets the qualification criteria.

Explore Terrain

FAQ: Big Beautiful Bill Act Auto Loan Deduction