No Tax on Car Loan Interest

A deduction is allowed for up to $10,000 of interest on a qualified vehicle loan used to purchase a new passenger vehicle after Dec. 31, 2024.

Qualified vehicle requirements:

• New passenger vehicles only. Used vehicle purchases do not qualify; original use must begin with the taxpayer.
• Eligible types: Car, minivan, van, sport utility vehicle, pickup truck, or motorcycle.
• Gross vehicle weight rating must be less than 14,000 pounds.
• U.S. assembly. Final assembly must occur in the United States.
• Personal use: The loan must be secured by the vehicle and the vehicle bought for personal use. Leases do not qualify.

The allowable deduction is reduced if the taxpayer’s MAGI exceeds $100,000 ($200,000 if married filing jointly). The $10,000 limitation is a per-return limit. The deduction is allowed for non-itemizers.

The Vehicle Identification Number (VIN) must be included on the return.

Recipients of qualified interest must file information returns with the IRS and furnish statements to taxpayers showing the total amount of interest received during the taxable year if the amount is $600 or more using new Form 1098-VLI.