2025 Auto Loan Interest Deduction
Beginning with tax year 2025 through 2028, there is a new temporary deduction up to $10,000 of interest paid on a loan that originated on or after January 1, 2025, to purchase a "qualifying passenger vehicle" for personal use. Lease payments do not qualify.
A qualifying passenger vehicle is a NEW car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating (GVWR) of less than 14,000 pounds. The vehicle must have also undergone final assembly in the United States. Used vehicles do not qualify.
The vehicle identification number (VIN) will be required to be reported on the income tax return. The IRS will provide transition relief for tax year 2025 for interest recipients subject to the new reporting requirements. A new Form 1099 will be created that will show the amount of qualified vehicle loan interest paid during the year.
This interest deduction gets reduced once modified adjusted gross income (MAGI) exceeds $100,000 ($200,000 if married filing jointly). The personal auto loan interest deduction will be reduced by $200 for each $1,000 MAGI exceeds the amounts shown above.
Refinanced loans do qualify, but only up to the amount of the original qualifying loan. Loans from related parties do not qualify.
This interest deduction can be claimed whether itemizing deductions or using the standard deduction.
NHTSA's VIN Decoder to Identify a Vehicle’s Plant of Manufacture
The NHTSA's VIN decoder website provides information about the vehicle’s plant of manufacture. After searching a VIN, you'll see the build plant and country for the vehicle in question. This is a two-step process:
Step 1: Go to https://vpic.nhtsa.dot.gov/decoder/ and enter the full VIN into NHTSA’s VIN decoder, then click Decode VIN.
Step 2: Refer to the field at the bottom of the page result, which expressly lists the build plant and country for the searched vehicle. It MUST show "United States (USA)" for the vehicle to qualify for the auto loan interest deduction.
