Vehicle Loan Interest Deduction

For informational purposes only. This content is not intended as tax or legal advice. Please consult a qualified tax professional regarding your individual situation. Information available at: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers

Overview of the new deduction

• Effective 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use that meets other eligibility criteria. Lease payments do not qualify
• Maximum annual deduction is $10,000
• Phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers)

What counts as qualified interest

Interest must be paid on a loan that:

• Originated after Dec. 31, 2024
• Was used to purchase a vehicle originally used by the taxpayer
• Was secured by a lien on the vehicle
• Was for a personal-use (nonbusiness) vehicle

If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.

What counts as a qualified vehicle

A qualified vehicle is a car, minivan, van, SUV, pickup truck or motorcycle that:

• Has a gross vehicle weight rating of less than 14,000 pounds
• Underwent final assembly in the United States

To verify final assembly, check one of these:

• The vehicle label at the dealership
• The vehicle identification number (VIN)
• The National Highway Traffic Safety Administration, NHTSA VIN Decoder (verify vehicle assembly location)

Who qualifies

• Available to both itemizing and non-itemizing taxpayers
• You must include the VIN on your return for any year you claim the deduction

Reporting requirements

• Atomic Credit Union satisfies the reporting obligations under section 6050AA for interest received in calendar year 2025 on a specified passenger vehicle loan by making a statement available to the individual on or before January 31, 2026, indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan. Statements are delivered by U.S. Mail or online account portal as chosen by the Member. Atomic Credit Union’s role is limited to accurately reporting the interest paid on your loan. Whether the interest is deductible is determined by IRS tax law and your tax advisor.