New Auto Loan Interest Deduction Available for 2025-2028: Up to $10K Per Return

The IRS and Treasury now allow a tax deduction for interest on auto loans used to buy new, U.S.-assembled cars purchased in 2025. Eligible taxpayers can deduct up to $10,000 per federal return for interest paid on qualifying 2025 loans, expiring Dec. 31, 2028. Key rules: Vehicles must be for personal use and fully assembled in the U.S. Deductions are phased out for MAGI above $100K (single) and $200K (married), with a $200 reduction per $1,000 over the limit. The $10,000 cap applies per return, and the deduction is available whether taking the standard or itemized deduction. Estimates suggest 4 million of the 13.4 million new cars sold in 2025 could qualify, with an average first-year deduction of about $4,000. Taxpayers should use IRS guidance and gather 2025 auto loan statements, filing IRS Schedule 1-A with their 2025 tax returns.