The "One Big Beautiful Bill Act" (OBBBA) introduces a new deduction for interest paid on a new car loan. Under the 2025 tax law, the Car Loan Interest Deduction allows taxpayers to deduct up to $10,000 in interest on new car loans, but it phases out based on Modified Adjusted Gross Income (MAGI). To qualify, the car must be new, built in the US, and for personal use.
The tax deduction phases out for taxpayers with modified adjusted gross income that exceeds $100,000 (or $200,000 for joint filers).
- Deduction is reduced by $200 for every $1,000 (or portion thereof) over the threshold.
- The deduction is completely phased out and becomes zero when their MAGI reach $250,000.
https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions has more info about this deduction.
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