One of the more surprising additions in the 2025 tax law is the return of an auto loan interest deduction.

Key Details

  • Deduct up to $10,000 per year in auto loan interest.
  • Applies only to new vehicles assembled in the U.S.
  • Loan must be originated after December 31, 2024.
  • Deduction available 2025–2028 only.

Income Limits

  • Full deduction: up to $100,000 AGI (single) / $200,000 AGI (joint).
  • Phases out gradually above those levels.

Above-the-Line Deduction

Because this is an above-the-line deduction, you can claim it even if you don’t itemize. That makes it widely available to middle-income households.

Military Family Relevance

Military families frequently purchase new vehicles. For those choosing U.S.-assembled cars, this deduction makes financing more affordable. While few families will hit the full $10,000 cap, most will see a few hundred dollars in annual savings.

Documentation

You’ll need to include the vehicle identification number (VIN) on your return, along with proof of interest paid.

At PIM Tax Services, we’ll help you navigate the rules and make sure you maximize this short-lived but valuable deduction.