If you purchased a new vehicle in 2025, a new tax benefit may be available to you. The “One Big Beautiful Bill Act,” signed into law in July 2025, introduced a temporary federal tax deduction for interest paid on vehicle loans for qualifying new vehicles. Here’s what credit union members need to know about the new tax deduction.
What is the new tax deduction?
This new tax deduction allows eligible taxpayers to deduct up to $10,000 in interest paid annually on a loan for a new personal vehicle purchased in 2025. The deduction is designed to incentivize new car purchases and make vehicle ownership more affordable for consumers during the 2025 tax year and beyond.
Key features:
- Deduction limit: Up to $10,000 per year in interest paid on a qualifying new car loan.
- Applies to: New personal vehicles only (not used vehicles or commercial vehicles).
- Purchase date: The new vehicle must be purchased, and the loan originated, after December 31, 2024, and before January 1, 2029.
- Assembly location: The vehicle's final assembly must have occurred in the United States. You may be able to verify this by checking if the Vehicle Identification Number (VIN) starts with 1, 4, or 5, or by using the NHTSA VIN Decoder
Note: You can typically find your VIN on the vehicle registration card and insurance policy. On the vehicle itself, the VIN is located near the spot where the dashboard meets the windshield on the driver’s side of the vehicle.
General eligibility guidelines
Here are the general guidelines for eligibility. Members should consult their tax advisor to determine eligibility.
- New vehicle purchase: The vehicle must be brand new – not previously owned or used.
- Personal use: The vehicle must be primarily for personal, family, or household use (not for business or commercial purposes).
- Loan originated in 2025: The interest must be paid on a loan that was originated and used to purchase a new vehicle in the 2025 calendar year.
- Qualifying vehicles: Additional requirements may apply regarding the type or value of the vehicle, emissions standards, and lender eligibility.
- Taxpayer status: The deduction may be subject to income limits or other tax filing requirements.
Why you should consult a tax advisor
Tax laws can be complex, and every individual’s financial situation is unique. We recommend that members interested in this deduction consult with a qualified tax advisor. A professional can help determine your eligibility, maximize your allowable deduction, and ensure all requirements are met for your specific circumstances.
If you have questions about vehicle loans or need assistance with the vehicle loan process, our credit union team is here to help. We’re dedicated to helping you make the most of your membership benefits and navigate new opportunities like this tax deduction.
This information is provided as a general overview and should not be considered tax advice. Please consult a tax professional to determine your specific eligibility and to take full advantage of this new deduction.
