The One Big Beautiful Bill Act: Key Tax Provisions for Personal-Use Vehicles
July 23, 2025
By Steph Noll
Tax Supervisor
The One Big Beautiful Bill Act (OBBB) introduces a new tax deduction for interest paid on loans used to purchase new personal-use vehicles. Historically, interest on automobile loans was considered a nondeductible personal expense. However, for tax years 2025 through 2028, taxpayers may deduct up to $10,000 annually in interest on qualifying vehicle loans.
The deduction is subject to income-based phaseouts, beginning at a modified adjusted gross income (MAGI) of $100,000 for single filers and $200,000 for joint filers. It is reduced by $200 for each $1,000 by which MAGI exceeds these amounts and is unavailable for single filers with MAGI above $150,000 and joint filers with MAGI above $250,000.
To be eligible, the loan must be for a new passenger vehicle purchased after 2024, with its original use beginning with the taxpayer. Used vehicles, campers and RVs are not eligible for this deduction. The vehicle must be for personal use, with final assembly in the United States, and meet specific vehicle type and weight requirements. Additionally, the loan must be secured by a lien on the vehicle and not be from a related party.
Changes to Clean Vehicle Tax Credits
Also related to personal-use vehicles, the OBBB accelerates the expiration of two key electric vehicle (EV) incentives: the new clean vehicle credit (Section 30D) and the used clean vehicle credit (Section 25E). Originally set to expire at the end of 2032, both credits will now sunset on Sept. 30, 2025.
The new clean vehicle credit offers up to $7,500 for new electric or fuel cell vehicles assembled in North America that meet battery sourcing rules and price limits. The used clean vehicle credit provides up to $4,000 (30% of the sale price) for used EVs at least two years old, sold by a dealer for $25,000 or less. Taxpayers considering an EV purchase must act promptly to benefit from either credit before Sept. 30, 2025.
In order to determine the final assembly location of your vehicle, you can enter the VIN on this website: https://vpic.nhtsa.dot.gov/decoder/
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