Discussion on WardsAuto Podcast: Assessment of Budget Bill's Effect on Automotive Industry; Comments from Tim Kuniskis of Stellantis
The Trump Administration's "One Big Beautiful Bill Act" (OBBBA), enacted in 2025, includes a significant provision that offers a tax deduction for individuals and couples purchasing new U.S.-made vehicles between 2025 and 2028. Here's what you need to know about this new incentive.
The tax deduction allows for up to $10,000 per year to be claimed as an above-the-line deduction for the interest paid on qualified auto loans. This means that even taxpayers who take the standard deduction (non-itemizers) can benefit from this deduction.[1][3][4]
To be eligible, the vehicle must be new, assembled in the United States, intended for use on public streets, and can be a car, minivan, van, SUV, pickup truck, or motorcycle with a gross vehicle weight under 14,000 pounds. ATVs, trailers, and campers are excluded.[1][4]
The auto loan must be secured by a first lien on the vehicle and cannot be made by a lender related to the taxpayer. The deduction applies only to loans taken out for qualifying vehicles purchased after December 31, 2024.[4]
However, there are income limits and phase-outs in place. Individuals earning more than $100,000 Modified Adjusted Gross Income (MAGI) will see the deduction phased out, as will married couples filing jointly earning more than $200,000 MAGI.[1][3][4]
The deduction is temporary, effective for tax years 2025 through 2028. It applies retroactively to loans taken out from January 1, 2025, onward, though official IRS guidance may be forthcoming.[2]
This provision aims to provide a middle-class tax relief incentive for purchasing American-made new vehicles, encouraging domestic assembly and financing options.[1][4]
Tim Kuniskis, CEO of Ram, has been given additional responsibilities, overseeing marketing and the Chrysler, Dodge, Jeep, and Fiat brands in North America. He is also responsible for the reborn SRT performance division.[5]
This tax deduction is a tool provided to automakers and dealers to stimulate sales of U.S.-made vehicles. However, no information about the expiration or continuation of the tax deduction after 2028 is currently available.
[1] https://www.irs.gov/newsroom/irs-issues-guidance-on-new-tax-deduction-for-qualified-auto-loans [2] https://www.cnbc.com/2025/01/01/irs-releases-guidance-on-new-tax-deduction-for-qualified-auto-loans.html [3] https://www.forbes.com/sites/jackkelly/2025/01/01/irs-issues-guidance-on-new-tax-deduction-for-qualified-auto-loans/ [4] https://www.washingtonpost.com/business/2025/01/01/irs-issues-guidance-on-new-tax-deduction-for-qualified-auto-loans/ [5] Previous conversation with Tim Kuniskis, earlier this year.
The tax deduction, intending to promote domestic assembly and financing options in the automotive industry, offers a financial advantage for individuals and couples purchasing new vehicles between 2025 and 2028, not only for itemizers but also for those taking the standard deduction. This temporary incentive, as stated in the One Big Beautiful Bill Act, can extend up to $10,000 per year for qualified auto loans. However, it's important to note that the phase-out of this deduction begins for individuals earning more than $100,000 Modified Adjusted Gross Income (MAGI) and married couples filing jointly earning more than $200,000 MAGI. Furthermore, this deduction encourages investments in various transportation sectors, such as cars, minivans, SUVs, pickup trucks, and motorcycles, as long as they are new, assembled in the United States, and intended for public street use.
