Purchasing a new vehicle comes with all sorts of excitement – and expenses. But recent legislation introduced a new tax deduction that can help those who qualify reduce some of the overall cost.
Starting with next April’s tax returns, for the 2025 tax year purchasers of brand-new vehicles could qualify for a temporary tax deduction on interest paid on the vehicle loan.
The deduction was part of the One Big Beautiful Bill signed into law on July 4, 2025. It allows qualified tax filers to write off up to $10,000 in vehicle loan interest a year based on income and other guidelines.
Here are the details on how long the deduction is available for and what vehicle purchases qualify. If you have questions about your specific situation, we encourage you to contact a tax professional.
When can people take advantage of the deduction?
Those who qualify can take the deduction for tax years 2025-2028.
Is the deduction available if you don’t itemize deductions on tax returns?
Yes! This deduction is called an “above the line” tax deduction and tax filers can take it even if they are not itemizing and taking the standard deduction.
What vehicle purchases are eligible?
- Vehicles must be new, not used.
- Vehicles must have been purchased and secured by a lien after December 31, 2024.
- Cars, minivans, sport utility vehicles, pickup trucks and motorcycles that weigh less than 14,000 pounds and are made primarily for public streets and highways are eligible.
- The vehicle must be for personal use, not for business or commercial use.
- The deduction is available only for vehicles whose final assembly took place in the United States. Car shoppers can find that information on the window sticker and the VIN. You can look what VIN is associated with which country through the National Highway Traffic Safety Administration.
What are the income limitations?
Single tax filers with modified adjusted gross incomes of no more than $100,000 and “married filing jointly” filers with modified adjusted gross incomes earning of no more than $200,000 qualify for the full $10,000 deduction. The deduction is reduced by $200 for every $1,000 of the qualified tax filer’s income above those limits and completely phases out at $150,000 for single filers and $250,000 for joint filers. If you have questions about this, we encourage you to contact a tax professional.
How SAFE can help
If you’re in the market for a new vehicle, our lending team is ready to help answer questions and find the right loan for you. Find our latest rates on safecu.org and easily apply for a vehicle loan through Online Banking and the SAFE Mobile App. You can talk with a vehicle loan specialist about the approval and buying process and apply over the phone through our Contact Center.
Let SAFE help you get behind the wheel of your next vehicle!
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