New Federal Tax Deduction Allows Some 2025 Car Buyers to Write Off Auto Loan Interest

NPR reports that a provision in the One Big Beautiful Bill Act is in effect for the current filing season, allowing many taxpayers who bought a new car in 2025 to deduct interest paid on their auto loans for the first time. The deduction only applies to new vehicles purchased after Dec. 31, 2024 that were finally assembled in the United States and are used for personal, not business, purposes; eligibility phases out starting at $100,000 modified adjusted gross income for single filers and $200,000 for joint filers. Taxpayers can deduct up to $10,000 in interest per year and, unusually, can claim it even if they take the standard deduction rather than itemizing, but must rely on their loan statements because lenders will not issue a special tax form. The article underscores that buyers of used cars—who tend to pay the steepest interest rates—are excluded, and that the new deduction was paired with elimination of the federal tax credit for buying electric vehicles, signaling a policy shift away from EV incentives toward more general auto-loan relief. Tax advisers quoted stress that the benefit is worth only "cents on the dollar" relative to the interest paid, varying by tax bracket, and that consumers must verify U.S. assembly using their vehicle identification number rather than assuming an "American" brand qualifies.