Thinking about buying a new car or motorcycle? Under the One, Big, Beautiful Bill, you may now be eligible for a deduction on car loan interest — even for personal-use vehicles. This limited-time tax benefit, effective from 2025 through 2028, allows you to deduct up to $10,000 in interest on qualifying vehicle loans, including those for U.S.-assembled cars and motorcycles.

This new rule, effective for tax years 2025 through 2028, allows eligible individuals to deduct up to $10,000 in interest paid on qualifying vehicle loans. Here’s what you need to know.

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What Is the Car Loan Interest Deduction?

Under Section 70203 of the OBBB, individuals can deduct interest paid on a loan used to purchase a qualified personal vehicle.

This is a new type of personal deduction — something previously unavailable for most vehicle purchases, as car loan interest was generally not deductible unless the vehicle was used for business purposes.

Now, for a limited time, taxpayers can benefit from this deduction even when the car or motorcycle is used strictly for personal use.

If you refinance a qualifying vehicle loan, interest on the refinanced portion can remain deductible, provided the new loan continues to meet all OBBB requirements — namely, it remains secured by the same vehicle and used for personal purposes.

However, leasing arrangements do not qualify, as lease payments are not treated as loan interest under federal tax law.

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What Qualifies as a “Qualified Vehicle”?

To claim the deduction, your vehicle must meet the following requirements:

• Purchased new (used vehicles do not qualify)
• Final assembly in the United States
• Personal use only (not business or commercial)
• Secured loan (the vehicle must serve as collateral for the loan)
• Loan originated after December 31, 2024

Eligible vehicle types include:

• Cars
• Minivans and vans
• SUVs and pickup trucks
• Motorcycles

Each must have a gross vehicle weight rating under 14,000 pounds.

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How to Verify U.S. Final Assembly

To confirm if your vehicle qualifies, check one of the following:

• The information label at the dealership
• The Vehicle Identification Number (VIN)
• The NHTSA VIN Decoder (available online at nhtsa.gov)

You’ll also need to include the VIN on your tax return for any year you claim this deduction.

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Deduction Limits and Phaseouts

• Maximum annual deduction: $10,000
• Phaseout begins:
  • At $100,000 modified adjusted gross income (MAGI) for single filers
  • At $200,000 MAGI for joint filers

The deduction is available to both itemizing and non-itemizing taxpayers, giving broad access to this new benefit.

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What About Motorcycles?

Yes — motorcycles are included in the definition of “qualified vehicles” under the OBBB, as long as:

• They are newly purchased (not used),
• Have final assembly in the U.S., and
• The loan is secured and meets the same requirements as other qualifying vehicles.

This means motorcycle enthusiasts financing a new bike could benefit from up to $10,000 in deductible loan interest, provided income thresholds are met.

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Effective Dates

• Applies to loans originated after December 31, 2024
• Deduction available for tax years 2025 through 2028
• Reporting relief applies for tax year 2025 only

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Why It Matters

This is the first time in recent memory that interest on personal-use car loans has been deductible under federal tax law. The change aims to make vehicle ownership more affordable amid rising interest rates and manufacturing costs — while encouraging the purchase of U.S.-assembled vehicles.