Summary
- The U.S. government’s new auto loan interest tax deduction could make buying a new car assembled in the U.S. more affordable
- Deduction is for purchasing a new car for personal use; used cars do not qualify
- Taxpayers can deduct up to $10,00 per year in interest on qualifying new auto loans
- There are income limits
Buying a new car is exciting, but it can also feel overwhelming when you consider the costs. That’s why the government’s new auto loan interest tax deduction of up to $10,000 per year for new vehicles assembled in the U.S. may make it more affordable for you to buy a car for personal use if you qualify.* Combine those savings with FIGFCU’s low auto loan rates (scroll down to see how low), and you get more value for your money to help your monthly budget go further. Here’s how the new auto loan interest tax deduction can work for you.
Lower costs, less stress.
A car isn’t just a way to get from point A to point B — it’s part of your everyday life. The new auto loan interest tax deduction can give you a little extra breathing room in your budget by reducing what you owe at tax time. Depending on the new vehicle, that could mean thousands of dollars in savings. It’s a practical benefit that may help make your monthly payments and overall costs easier to manage.
Here is background on the new auto loan interest tax deduction, courtesy of the IRS. Keep reading to see if you qualify.
- New deduction: Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified new vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)
- Maximum annual deduction is $10,000.
- Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
- Qualified interest: To qualify for the deduction, the interest must be paid on a loan that is:
- Originated after December 31, 2024,
- Used to purchase a new vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify),
- For a personal use vehicle (not for business or commercial use) and
- Secured by a lien on the vehicle.
If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.
- Qualified vehicle: A qualified vehicle is a new car, minivan, van, SUV, pickup truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds that has undergone final assembly in the United States.
- Final assembly in the United States: The location of final assembly will be listed on the vehicle information label attached to each vehicle on a dealer’s premises. You may also rely on the vehicle’s plant of manufacture as reported in the vehicle identification number (VIN) to determine whether a vehicle has undergone final assembly in the United States. Still unsure if the car was assembled in the U.S., visit the VIN Decoder website provided by the National Highway Traffic Safety Administration (NHTSA).
- Taxpayer eligibility: The deduction is available to both itemizing and non-itemizing taxpayers.
- The taxpayer must include the VIN of the qualified vehicle on the tax return for any year in which the deduction is claimed.
- Reporting: Lenders or other 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.
- Guidance: The IRS will provide transition relief for tax year 2025 for interest recipients subject to the new reporting requirements.
More options for you.
This new auto loan interest tax deduction applies to a wide range of new vehicles assembled in the U.S., including many of today’s most popular cars. That means you don’t have to choose between saving money and finding the car that truly fits your lifestyle. Whether you need a family SUV, a fuel-efficient commuter, or a car with the latest technology, the tax deduction can help open up more possibilities for owning your dream car.
FAQs
Here are a few common questions and answers about the new car loan interest deduction.
- Do leases qualify? No—only interest on a vehicle loan qualifies.
- Do used vehicles qualify? No. The original use must begin with you (for new vehicles only).
- What income levels phase out the deduction? $100,000 for single filers; $200,000 for joint filers (phased reduction above those thresholds).
- What vehicles are eligible? Cars, vans, SUVs, pickups, minivans, and motorcycles under 14,000 lbs. GVWR with final assembly in the U.S.
- How do I prove final assembly? Keep the VIN and purchase docs; verify on the dealer label or via the NHTSA VIN decoder. You must include the VIN on your tax return for each year you claim the deduction.
- Are lenders required to report interest? Yes. Lenders must file information returns and furnish statements showing the interest you paid. (IRS will provide 2025 transition relief for reporters.)
Pair the tax break with an affordable auto loan to save even more.
Our goal is to make financing your car as simple and affordable as possible. Our auto loans are as low as 5.49% APR** with Direct Deposit and Auto Pay (6.49% APR without the discounts). While the new tax break doesn’t apply to used vehicles, our auto rates do, and they also start as low as 5.49% APR with Direct Deposit and Auto Pay (6.49% APR without the discounts). If you’re looking to refinance your current auto, keep reading.
Our auto refinance rates are also as low as 5.49% APR (with qualifying conditions). When you combine that with the savings from the new tax credit, it’s an opportunity to stretch your dollars further and can make owning your qualifying new car easier on your budget.
If you’re not in the market for a car, you can still save money. We also finance motorhomes, travel trailers, motorcycles, boats, and personal watercraft at competitive rates. While these vehicles are fun, please note, they are not eligible for the auto loan interest tax deduction.
Final thoughts.
With the new auto loan interest tax deduction and our auto loan rates, buying your next car can be more affordable. It’s not about spending more — it’s about keeping more of your money in your pocket while still getting the vehicle that fits your needs.
Our team is here to help you every step of the way — from understanding how the tax deduction might apply to your purchase to choosing the right auto loan term. You’ll get personalized guidance, not just numbers on a page. If you’re thinking about a new or used car or refinancing, now’s the perfect time to explore your options. Reach out to us online or call 800.877.2345 today to discover how we can help put you in the driver’s seat of your dream car.
*FIGFCU does not provide tax advice. This material is for informational purposes only and is not a substitute for professional tax advice. Consult your tax advisor regarding eligibility. IRS rules may change; see IRS.gov for the latest guidance.
**APR=Annual Percentage Rate. Rates shown are our Preferred rates based on credit worthiness (FICO® Score), and a 1.00% APR Auto Loan discount for Direct Deposit or full Agent Net Check going into a FIGFCU Checking account (either High Yield Checking or CashBack Checking) in the amount of $1,000.00 (one thousand dollars) or more monthly and Automatic Payment/Folio Deduction as a repayment method to qualify. Rates and terms are subject to credit approval. Other rates and terms are available. Other restrictions may apply. Financing available up to 130% of the Purchase Price, including tax, license, warranties and negative equity on a trade for qualified borrowers. Financing available up to 130% of the Purchase Price for a lease buyout or refinance, excluding tax or license, which were paid at the time of purchase. The Credit Union only lends up to 100% loan-to-value (LTV) for clear title or private party purchases. Please speak with a Loan Representative for complete details and qualifying criteria. Rates and terms are subject to credit approval and are subject to change at any time and without notice. All values are determined by the Credit Union using either vehicle cost or Kelly Blue Book/NADA, whichever is lower. Other rates and terms are available.
