Requirements to claim a deduction for interest paid on auto loans are many!
OBBBA benefits include new tax deductions for tip income, overtime pay, and interest paid on auto loans, as well as an additional standard deduction for senior citizens and an increased maximum deduction for state and local taxes. There is a great deal of complexity with these provisions. To prove our point, the following requirements must be met for a taxpayer to claim a deduction for interest paid on auto loans:
- The vehicle must be new, used car purchases do not qualify;
- The vehicle must have been purchased for personal use, lease payments do not qualify;
- The loan must have originated after 12/31/24;
- The loan must be secured by a lien on the vehicle;
- The vehicle must carry a gross vehicle weight rating of less than 14,000 pounds;
- The vehicle identification number must be included on the tax return;
- The loan must not have been obtained from a related party;
- The vehicle must have “final assembly in the U.S.”
- Deduction is capped at $10,000 and begins to phase out for taxpayers with MAGI over $100,000 for single / $200,000 for married filing jointly taxpayers at a rate of 20% for each additional dollar of income.
- Fully phases out for single filers with MAGI over $150,000 and joint filers with MAGI over $250,000.
Reach out to us: If you have questions on any of this or any other OBBBA tax breaks please email us at CPA@fuoco.com.
