2025 Vehicle Loan Tax Deductions

Starting in tax year 2025, a new tax benefit helps make buying a new vehicle a little easier on your budget. As part of the Working Families Tax Cuts (sometimes called the One Big Beautiful Bill), eligible taxpayers can deduct interest paid on certain new vehicle loans. Potentially lowering taxable income for several years. Taxpayers may be able to deduct up to $10,000 per year in interest paid on a qualifying vehicle loan.

Like many tax benefits, the details matter. Here’s a clear, plain-English look at how the car loan interest deduction works, who may qualify, and what to keep in mind as you plan ahead.

Qualifications for Vehicles, Loans, and Income

When filing your 2025 tax return, you’ll report the total interest paid on your qualifying vehicle loan. Your lender will provide this information, which brings us to an important next step. Determining if your loan interest qualifies for the deduction. To claim the car loan interest deduction, the loan, the vehicle, and the taxpayer must all meet certain basic requirements. For instance, the loan must be taken out after December 31, 2024, be secured by a new vehicle assembled in the United States, and used for a purchase. There are other requirements related to household income limits and qualifications of the dealership and lender.

The first step to take is to do a little research to find out what cars qualify for OBBBA. You can begin by looking up your vehicle’s VIN number to find out where it was assembled.

Next, familiarize yourself with the OBBBA Rules and the 2025 car loan tax deduction. The details of the bill, qualifying purchases, and household income limits can be found by clicking this link. Before claiming any deductions, please consult your tax advisor about your situation.

Where to Find Your Vehicle Loan Interest

If you financed a qualifying vehicle through First United, you can quickly see the interest you paid in 2025 by logging in to your Online Banking account, look under Details and find your Accrued Interest. Other lenders may provide annual interest information through monthly or annual loan statements.

A Final Thought

Be sure to consult your tax advisor to determine if your vehicle purchase qualifies. And while tax rules may change, our commitment stays the same: helping you Spend Life Wisely by making informed financial choices with confidence. We’re here to help you plan for the road ahead.

Disclaimer: This article is provided for general informational purposes only and does not constitute tax, legal, or financial advice, nor does it represent an offer, commitment, or recommendation for any product or service. First United Bank does not provide tax or legal advice and accepts no responsibility for any information contained herein. Tax laws and regulations are subject to change, and the application of those laws depends on individual facts and circumstances. Eligibility for any tax deduction, including the vehicle loan interest deduction, is determined by the Internal Revenue Service (IRS) and applicable Treasury regulations. Readers should consult a qualified tax professional regarding their specific situation before making any financial or tax-related decisions. First United Bank makes no representations or warranties regarding eligibility for any tax benefit described herein and disclaims any liability for actions taken based on this information.

FAQ

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  How do I know if I qualify for the 2025 car loan tax deduction?

  Only the IRS can determine eligibility. Provided is only a list of basic requirements. Please visit One, Big, Beautiful Bill provisions | Internal Revenue Service for more detailed information to see if you qualify. We would love to be your everything, but unfortunately, we are not tax professionals.

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  How will First United Bank tell me how much interest I paid on my car loan in 2025?

  First United Bank includes this in your Online Banking.

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  Does the interest on my lease payments count?

  Unfortunately, no. This tax benefit is only for a purchase of a qualified vehicle.

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  Will I qualify if I am refinancing the car loan but still meet all other requirements?

  Yes, both purchasing and refinancing qualify for this tax benefit.

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  I meet all the detailed eligibility requirements for this tax benefit. What to do I next?

  • The links below will provide some guidance for this benefit. Please refer to a tax professional for any further questions.
  • One, Big, Beautiful Bill provisions | Internal Revenue Service
  • 26 USC 163: Interest
  • NHTSA VIN Decoder (verify vehicle assembly location)

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  Should I consult a tax professional?

  Yes — a qualified tax professional can help determine if you qualify for the deduction and how to report it.