Auto Loan Interest Tax Deduction
Big Changes Are Coming: EV Tax Credits Ending & New Auto Loan Tax Deduction!
Starting July 4, 2025, there are some important updates to federal vehicle incentives that could impact your next vehicle purchase — especially if you're considering going electric or financing a new car.
What’s Changing?
- Ending Soon – EV Tax Credits:
- New EVs: The $7,500 federal tax credit (30D) for new electric vehicles will end after September 30, 2025.
- Used EVs: The $4,000 credit (25E) for eligible used EVs will also end after September 30, 2025.
- Commercial/Leased EVs: The commercial EV credit (45W) will no longer be available after that same date.
- New Opportunity – Auto Loan Interest Deduction:
- You can deduct up to $10,000 per year in interest on auto loans for new vehicles used for personal purposes.
- This applies to electric or gas-powered vehicles (EV or ICE) purchased between January 1, 2025 and December 31, 2028.
- The vehicle must be built in the U.S. (Check the first digit of the VIN — 1, 4, or 5 means U.S. assembly).
What This Means for You
- If you're considering an EV, now’s the time to act — those federal tax credits are going away after September 30, 2025.
- If you're planning to finance a new car, you may qualify for a major tax deduction on your loan interest — potentially saving you thousands!
- Ask your dealer to help identify which vehicles qualify (look for VINs starting with 1, 4, or 5) and whether your income makes you eligible for the deduction.
Where Can I Learn More?
For official updates and details, visit the IRS website at IRS.gov.
Want to estimate your savings? Use the GM Financial Calculator.
Need more info? Check out our FAQ page or view the Job Aid.
Note: This summary is for informational purposes only and doesn't replace professional tax or legal advice. Eligibility for deductions depends on personal financial details, including income level. Talk to your tax advisor to see how these changes may apply to you.
One Big Beautiful Bill Act: Automotive Loan Interest Tax Deductions FAQs
CONSULT YOUR TAX, LEGAL, OR ACCOUNTING PROFESSIONAL IF YOU HAVE QUESTIONS. THIS INFORMATION DOES NOT CONSTITUTE TAX, ACCOUNTING, OR LEGAL ADVICE.
What Is the New Vehicle Loan Interest Tax Deduction?
Under the new law, up to $10,000 per year of interest paid on auto loans for new vehicle purchases is tax-deductible provided all vehicle and customer eligibility requirements are met.
Is the tax deduction a direct rebate at time of purchase?
No. Eligible customers must claim the deduction to reduce their taxable income when they file their tax return.
What is the timing for the tax deduction?
The tax deduction is available for new vehicles financed on or after January 1, 2025 through December 31, 2028 and covers tax years 2025–2028. Interest must be from new debt contracted on or after January 1, 2025.
Are there customer income caps for eligibility?
Yes. $100,000 for individuals and $200,000 for married customers filing jointly, after which the deduction begins to phase out. The deduction is reduced by $200 for each $1,000 over the limit.
Is the tax deduction available for tax filers taking the standard deduction?
Yes. It applies whether itemizing or taking the standard deduction.
Are deductions available for business or commercial entities?
No. Eligible purchases are limited to personal-use vehicles.
Is there a maximum deduction?
Yes. Capped at $10,000 in qualifying interest payments annually.
Which vehicles qualify?
GM EV and ICE vehicles under 14,000 lbs with final assembly in the U.S. (VIN starts with 1, 4, or 5).
Do lease vehicles qualify?
No.
Do used vehicles qualify?
No.
Are Courtesy Transportation vehicles eligible?
No. “Original use” must start with the taxpayer.
Do refinanced loans qualify?
Yes, but only if the original debt qualified and refinancing does not increase the debt. Loans originated before Jan 1, 2025 do not qualify.
How do customers substantiate the amount of interest paid?
Keep detailed records. If over $600 is paid in interest, lenders will provide a statement by January 31 of the following year.