Deduct Car Loan Interest

The Act creates a new deduction for “qualified passenger vehicle loan interest. This deduction applies to tax years 2025-2028. Generally, qualified passenger vehicle loan interest is interest paid or accrued on debt incurred after December 31, 2024, for the purchase of (and secured by a first lien on) an applicable passenger vehicle for personal use. The annual deductible interest is capped at $10,000 and phases out when AGI exceeds $100,000 (singles) or $200,000 (MFJ). It is totally eliminated when AGI reaches $150,000 (singles) or $250,000 (MFJ). An applicable passenger vehicle must be manufactured for use primarily on public streets, roads, and highways and have at least two wheels. Final assembly of the vehicle must occur in the United States.