No Tax on Car Loan Interest (Section 70203): New Tax Benefit 2025–2028

mariadrg2021
Jan 19
2 min read

What is “No Tax on Car Loan Interest”?

From 2025 through 2028 , some people may be able to claim a deduction of up to $10,000 per year for interest paid on a loan used to purchase a qualifying vehicle for personal use .

Important:

This does NOT apply to leases (rentals/leases).
It is a deduction available with standard deduction or itemized deductions .

How much can you deduct?

Up to $10,000 per year (annual maximum).

Income limit (phase-out)

The deduction begins to decrease if your Modified Adjusted Gross Income (MAGI) falls below:

$100,000 (single)
$200,000 (married filing jointly)

What interest rate qualifies?

The interest must come from a loan that meets these rules:

The loan originated after December 31, 2024

It was used to purchase a vehicle for personal use (not business)

The vehicle was purchased for the taxpayer's use (originally used by the taxpayer)

The loan is secured by a lien on the vehicle.

If you refinance the loan, the refinancing interest rate may also qualify , as long as it stays within the rules.

What is considered a “qualified vehicle”?

A qualifying vehicle includes: Car, minivan, van, SUV, pickup truck, or motorcycle

And it must comply:

GVWR (gross weight) less than 14,000 pounds
Final assembly in the United States

How do I confirm if the car was assembled in the USA?

You can verify this with your VIN using the official NHTSA decoder.

Common ways to verify the “final assembly”:

Vehicle label / dealer information
VIN
NHTSA VIN Decoder

KEY requirement to claim it: VIN on the declaration

To claim this deduction, you must include the VIN in your tax return for the year in which you claim it.

Quick checklist to find out if you qualify

Before you get too excited, check this out:

Loan originated after 12/31/2024. Car for personal use. Final assembly in USA. GVWR less than 14,000 lbs. You have the VIN available. Your income does not disqualify you from the phase-out benefit.

Why is this benefit so important?

Because normally car loan interest didn't provide a personal tax benefit ... and now it can help you reduce your taxable income for 4 years (2025–2028).

Sources (official)

IRS – “One Big Beautiful Bill Act… No Tax on Car Loan Interest”
IRS Newsroom – Guidance on the new car loan interest deduction
NHTSA – VIN Decoder (verification of plant/country of manufacture)

Do you want to know if your loan qualifies and how much you could deduct?

At MDR Tax Filing we help you to:

Confirm eligibility (including VIN) Review income/MAGI and phase-out Prepare your tax return correctly to maximize benefits

813-522-9745 | 813

in Accounting and Tax Management

813-522-9745 | 813-403-1724