Auto Loan Tax Deduction: What You Need to Know

If you’re in Mt. Carroll, Illinois, buying a new car, truck, or SUV is about to come with serious savings. Beginning in 2025, the federal government will offer the Auto Loan Tax Deduction, giving qualifying drivers the chance to deduct up to $10,000 per year when financing a brand-new, U.S.-assembled vehicle.

Whether you’re cruising through downtown Mt. Carroll, commuting along Route 78, or taking weekend trips through the rolling countryside, this new tax break makes upgrading your vehicle more affordable. Popular models like the Ford F-150, Chevy Silverado, Jeep Grand Cherokee, Honda Accord, and Toyota Camry are among those that qualify — helping Mt. Carroll drivers get the vehicles they want while saving money at tax time.

• You’re buying a new vehicle (cars, SUVs, pickup trucks, minivans, motorcycles).
• The car is assembled in the U.S. and has a VIN you report on your tax return.
• The loan is a first lien auto loan (not a lease, not a refinance beyond your original amount, not a second mortgage).
• It’s for personal use (not business, fleets, or company cars).

• Up to $10,000 per year on your taxes.
• If your income is over certain limits, the deduction phases out:
  • Over $100,000 for individuals.
  • Over $200,000 for couples filing jointly.
  • Fully phased out at $150,000 (single) / $250,000 (joint).

• Used cars or leases (sorry, only brand new).
• Business or fleet vehicles.
• Cars with salvage titles or those bought for parts.
• Loans from family or related parties.

• For auto loans started January 1, 2025 – December 31, 2028.
• After 2028, the deduction is set to expire unless Congress extends it.

• Keep your loan paperwork and VIN info.
• Report the VIN on your tax return.
• Keep proof the car was assembled in the U.S. (IRS provides a list of qualifying vehicles).
• Be ready in case the IRS asks you to show documents.

1. Don’t assume every new car qualifies — check the IRS eligibility list before you buy.
2. Remember: this is a deduction, not a rebate. It lowers your taxable income, not your loan payment.
3. The IRS may audit, so keep your records safe.

Have more questions? See your local tax epert.