The new law, the One Big Beautiful Bill (HR1), brings benefits for middle-class taxpayers. One of the key features lets you deduct up to $10,000 in “Qualified Passenger Vehicle Loan Interest” for vehicles purchased during tax years starting after December 31, 2024, and before January 1, 2029.
To qualify:
- The loan must be secured by the vehicle purchased for personal use.
- Business vehicles don’t qualify (they have separate rules).
- Leased vehicles don’t qualify.
- Interest on refinanced loans can qualify, as long as the new loan amount does not exceed the original loan.
There are other exceptions. The following loans cannot be used for this deduction:
- Loans for fleet sales
- Loans for commercial vehicles not used personally
- Loans for vehicles with a salvage title
- Loans for vehicles intended for scrap or parts
- Loans from related parties
Not every vehicle purchase will qualify. The vehicle must:
- Have final assembly in the U.S.
- Be purchased for the original use by the taxpayer
- Be made mainly for use on public streets, roads, or highways
- Be a car, minivan, van, SUV, pickup truck, or motorcycle with at least 2 wheels
- Be treated as a motor vehicle under Title II of the Clean Air Act
- Have a gross vehicle weight under 14,000 pounds
- Not run exclusively on rails
To claim the deduction:
- Your Adjusted Gross Income (AGI) must be under $100,000 ($200,000 if married filing jointly), including U.S. territory income and foreign income for U.S. citizens abroad.
- You must report your VIN on your tax return. Taxpayers will get a form similar to a 1098 mortgage form.
- You don’t have to itemize. The deduction will likely appear on Form 1040, Schedule 1.
If you have questions about Qualified Passenger Vehicle Loan Interest, contact Jorge Guerrero at jguerrero@peasebell.com
