2025 brings good news for those in the United States who are thinking about buying a personal vehicle with a loan. The Social Security Administration (SSA), together with the IRS, have included a provision in a new law that allows a tax deduction for interest paid on car loans.
This is a real and surprising opportunity: you can deduct up to $10,000 per year in interest on a car loan. The new feature comes within the so-called “One Big Beautiful Bill” (OBBB), signed on July 4, 2025, which introduces temporary tax benefits from 2025 through 2028.
Ssa and the Irs give good news to these Americans: pay attention if you buy a car
Among them, a deduction that allows taxpayers to subtract from taxable income up to $10,000 in interest paid on a new car, as long as you meet certain requirements. The car must be new, for personal use, with the loan originated after December 31, 2024, and with a first lien.
In addition, it must have been completed (assembled) in United States. To make sure, you just need to look at the vehicle's label or use your VIN to confirm the assembly site. The deduction is above the line, you can take advantage of it even if you don't itemize your return, and it's accessible to many more taxpayers.
The maximum you can deduct when buying a car with a loan
The maximum deductible amount is $10,000 per year, but there are income limits. If you are an individual and have a Modified Adjusted Gross Income (MAGI) under $100,000, or a married couple filing jointly with MAGI under $200,000, you can deduct the full amount.
If your income exceeds those limits, the deduction decreases by $200 for every $1,000 you go over. It disappears completely if you exceed $150,000 (individuals) or $250,000 (couple).
What this measure means for Americans
It represents real tax savings for those who buy financed cars. Not everyone pays $10,000 in interest in a year, but even deducting a few thousand means you have more money in your pocket. For example, someone with a high loan or high interest could save between $300 and $800 per year.
The SSA, together with the IRS, have given this tax relief to ease the burden of the high cost of vehicle loans. Although it doesn't exempt from the tax on Social Security benefits, this deduction creates a real incentive to buy new cars assembled in United States, while also promoting domestic manufacturing.