The new tax deduction for auto loan interest applies to loans for new vehicles assembled in the U.S. Taxpayers can deduct up to $10,000 annually from 2025 through 2028. The deduction is available regardless of whether individuals itemize deductions but is limited to those whose income is within specific thresholds. The law aims to stimulate domestic auto production and make car ownership more affordable. However, it phases out for higher-income earners, excluding many potential beneficiaries.
The new tax break will be available even to people who don't itemize deductions, but there are some caveats that could limit its reach, including vehicle assembly location and loan issuance date.
The law allows taxpayers to deduct up to $10,000 of interest payments annually on loans for new American-made vehicles from 2025 through 2028, applying only to personal use vehicles.
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