New Vehicle Tax Deduction

What You Need to Know:

If you’re thinking about buying a new vehicle, there’s a new federal tax deduction that may help lower your tax bill — but it’s important to understand how it works before counting on it.

Under the One Big Beautiful Bill Act (OBBBA), eligible taxpayers may be able to deduct the interest paid on a loan for a new vehicle when filing their federal income taxes. If you finance a new eligible vehicle, some of the interest you pay on the loan could reduce your taxable income. 

Who might qualify?

You may be eligible if:

  • You purchase a new vehicle manufactured after December 31st, 2024 with final assembly in the United States.
  • The vehicle is for personal use.
  • Your income falls within IRS-defined limits.
  • You itemize deductions or otherwise qualify under IRS rules.

Not everyone will qualify, and eligibility requirements depends on your individual tax situation.

What doesn’t qualify?

  • Used vehicles
  • Leases
  • Dealer fees, sales tax, or the vehicle price itself
  • Interest not directly tied to the original purchase of a new, eligible vehicle, such as:
    • Cash-out refinance amounts
    • Interest on balances above the original purchase price
    • Interest related to non-vehicle add-ons or unrelated debt

What This Means For You

This deduction doesn’t reduce your loan payment – it may reduce your taxable income when you file your return. The actual benefit varies by person and income level.

Talk to a Tax Professional

Tax rules can be complex, and this deduction may not apply to everyone. We strongly recommend speaking with a qualified tax advisor to see how this could affect your specific situation. Show Me Credit Union does not provide tax advice. Eligibility and benefits depend on individual circumstances and IRS guidelines.

For New Purchases in 2025 Financed at SMCU

If you financed an eligible new vehicle purchase in 2025 with Show Me Credit Union, your year-to-date (YTD) loan interest will be listed at the bottom of your December 2025 loan statement. This amount can be used when preparing your 2025 tax return or when working with your tax professional.

To see if a new vehicle meets the eligibility requirements, please visit the VIN Vehicle Decoder

For more details, please visit One Big Beautiful Bill Act – Provisions for Individuals