Auto Loan Interest Deduction

Maximize Your Savings: New Federal Auto Loan Interest Deduction (2025-2028)

Feldmann Imports Mercedes-Benz Bloomington MN

Starting January 2025 through 2028, qualifying taxpayers can benefit from the newly introduced Auto Interest Deduction. This federal income tax deduction allows you to claim up to $10,000 annually on the interest paid for eligible car loans—even if you don't itemize deductions.

What is the Auto Interest Deduction?

The Auto Interest Deduction provides substantial tax savings for qualifying vehicle buyers by allowing the interest paid on car loans to be deducted from federal income taxes. Previously considered non-deductible personal interest, this change significantly enhances vehicle affordability for millions of Americans.

Who Qualifies for the Auto Interest Deduction?

Eligible Loan Requirements:

  • Date of Loan: Loan must be taken out after December 31, 2024.
  • Personal Use: Vehicle must be for personal, non-commercial use.
  • Secured Loan: The loan must have a first lien secured on the vehicle.
  • Reporting: Vehicle Identification Number (VIN) must be reported on your tax return.

Eligible Vehicles:

  • New Vehicle Purchase: Must be originally purchased and titled by you, the taxpayer.
  • U.S. Assembly: Vehicle must be finally assembled in the United States.
  • Vehicle Types: Cars, pickup trucks, SUVs, vans, minivans, or motorcycles with at least two wheels.
  • Weight Limit: Gross vehicle weight under 14,000 pounds.
  • Road Use: Vehicle must be intended for use on public roads.

Mercedes-Benz Eligible Vehicles Include:

  • GLE350W4
  • GLE450C4
  • GLE450E4
  • GLE450W4
  • GLE53C4
  • GLE53W4
  • GLE580W4
  • GLE63C4s
  • GLE63W4S
     
  • GLS450W4
  • GLS580W4
  • GLS63W4S
     
  • AMGEQEV4
  • AMGEQEX4
  • AMGEQSV4
     
  • EQE350
  • EQE350V4
  • EQE350X
  • EQE350X4
  • EQE500V4
  • EQE500X4
  • EQS450V
  • EQS450V4
  • EQS450X
  • EQS450X4
  • EQS580V4
  • EQS580X4
  • EQS680 MAYBACH
     
  • GLC - Eligible Soon!

Non-Eligible Vehicles and Loans:

  • Used vehicles
  • Fleet purchases
  • Commercial-use vehicles
  • Lease financing
  • Salvage title vehicles
  • Vehicles bought for parts or scrap
  • Vehicles assembled outside the U.S.
  • Loans from related parties (family or affiliated businesses)

Income-Based Eligibility Limits:

The deduction phases out gradually based on Modified Adjusted Gross Income (MAGI):

  • Single filers: Phase-out begins at $100,000 MAGI, fully phased out at approximately $150,000 MAGI.
  • Joint filers: Phase-out begins at $200,000 MAGI, fully phased out at approximately $250,000 MAGI.
  • Deduction reduces by $200 for every $1,000 over the threshold.

Refinancing Your Loan?

Refinancing remains eligible provided:

  • The refinanced amount doesn't exceed the original principal.
  • The refinanced loan remains secured by the same vehicle.

Lender Reporting Obligations:

Lenders receiving $600 or more in qualifying auto loan interest must:

  • File IRS Form 6050AA, detailing borrower, loan terms, and vehicle information.
  • Provide the borrower with a detailed statement by January 31st of the following year.

How to Claim Your Deduction:

To claim your Auto Interest Deduction, include the vehicle’s VIN on your federal tax return along with the lender-issued interest statement.

Plan Your Auto Purchase Today!

Take advantage of this limited-time tax opportunity. Secure your new, U.S.-assembled vehicle and maximize your tax savings through the Auto Interest Deduction.

For further assistance or information, consult your tax advisor to ensure eligibility and maximize your deduction benefits.