A new federal tax provision may help qualifying members reduce their taxable income when they finance a brand‑new vehicle. Beginning in tax year 2025, certain auto loan interest may be deductible under recently enacted legislation.
Here is an overview to help you understand how the deduction works and what you may need when filing your taxes.
About the Deduction
A new federal rule allows taxpayers to deduct interest paid on eligible new‑vehicle loans for tax years 2025 through 2028, up to specified limits. This provision was included as part of the One Big Beautiful Bill Act.
This deduction applies only to the interest portion of your auto loan payments and not the principal.
Who May Qualify
To take advantage of this deduction, both the vehicle and loan must meet the following conditions:
Vehicle Requirements
- Must be brand new (first‑time ownership). Used vehicles are not eligible.
- Purchased on or after January 1, 2025.
- Must be a passenger vehicle such as a car, SUV, truck, van, minivan or motorcycle.
- Final assembly must occur in the United States. (Members can verify this using a VIN lookup tool.)
- Gross vehicle weight rating must be under 14,000 lbs.
Loan Requirements
- Interest must be paid on a qualifying auto loan used to purchase the vehicle.
- The VIN must be included when claiming the deduction.
- Loan must be for personal use. Vehicles bought strictly for business use do not qualify.
How to Locate Your Interest Paid
You can find your year‑to‑date interest paid information:
- On your December 31 credit union statement, or
- Within online or mobile banking under the applicable loan account.
Before Filing Your Taxes
Because everyone’s tax situation is different, we encourage members to:
- Consult with a tax professional, and/or
- Review IRS guidance related to the “No Tax on Car Loan Interest” provision under Section 70203.