OBBB’s “$10,000 car deductible” isn’t what it sounds like. Here’s what it really is.

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Key takeaway:

• What it is: A deduction for interest paid on a qualifying vehicle loan.
• Max deduction: Up to $10,000 per year.
• When it applies: 2025–2028, for loans originated after Dec. 31, 2024.
• Big “gotcha”: The vehicle must have final assembly in the U.S.
• Income limits: Starts phasing out over $100,000 MAGI (single) / $200,000 (joint).

If you’ve heard about a “$10,000 car deductible” tied to the One Big Beautiful Bill Act (OBBB), here’s the key detail: it’s not $10,000 off the price of a car.It’s a temporary federal tax deduction for car loan interest, available for tax years 2025 through 2028 — and only for certain buyers and vehicles

What is the OBBB car loan interest deduction?

Under the IRS‘s guidance on OBBB, eligible taxpayers can deduct interest paid on a loan used to purchase a qualified vehicle for personal use (leases don’t qualify). The deduction is available for 2025 through 2028.

This is designed to lower the after-tax cost of financing, but the benefit can be modest for many borrowers (more on that below).

Who qualifies for the “$10,000 car deductible”?

Think of eligibility in three buckets: the loan, the vehicle, and your income.

1) Your loan must meet these rules

To qualify, the interest has to be paid on a loan that is: originated after Dec. 31, 2024, used to buy the vehicle, secured by a lien, and for a personal-use vehicle (not business/commercial).

Good news if you refinance: the IRS says that if a qualifying loan is refinanced, interest on the refinanced amount is generally eligible.

2) Your vehicle must qualify (and final assembly matters)

A “qualified vehicle” includes cars, minivans, vans, SUVs, pickup trucks, and motorcycles under 14,000 pounds GVWR, and it must have undergone final assembly in the United States.

Used cars don’t qualify under the “original use starts with the taxpayer” rule.

3) Your income may reduce (or eliminate) the deduction

The deduction phases out for higher earners, starting at $100,000 MAGI (single) and $200,000 (married filing jointly).

How to check “final assembly in the U.S.” before you buy

This is where many shoppers could get tripped up.

The IRS says the final assembly location is listed on the vehicle information label (VIN) on cars at the dealer. It also says you can use the vehicle’s VIN plant of manufacture to determine whether final assembly was in the U.S.

What to do:

• Check the vehicle information label on the lot.
• Run the VIN through NHTSA’s VIN Decoder and look for plant information.

How much could you actually save?

The headline “$10,000 deduction” sounds huge, but most people won’t come close to that cap.

A $20,000 loan for five years at 10% would total about $5,500 in interest over the life of the loan. If you’re in the 22% tax bracket, the example estimates about $242/year for four years — less than $1,000 total saved overall.

And to hit the full $10,000 interest deduction in a single year, one analysis suggests you’d need something like a ~$112,000 loan at ~9% for 72 months — far above what most borrowers take out.

Bottom line: for many buyers, this is more like a “nice bonus” than a reason to stretch your budget.

What if you refinance your auto loan?

Refinancing can matter for two reasons: it may lower your rate (which lowers your interest costs), and it may affect how much interest you pay each year which could change the size of any interest-based tax deduction.

If you refinance, focus on the basics first: APR, term length, fees, and total interest paid.

Refinance checklist (quick):

• What’s my current APR and remaining term?
• Will the new APR meaningfully reduce total interest?
• Are there origination fees or add-ons?
• Does the new term increase the time I’m in negative equity?
• Can I keep (or improve) my payoff timeline?

Where to compare offers: You can shop multiple lenders directly, or use a refinance marketplace (like Caribou) that lets you compare offers in one place.

How to claim the deduction on your tax return

The IRS says you must include the VIN on your tax return for any year you claim the deduction, and lenders must provide statements showing the interest received (with transition relief in 2025).

Here’s how to claim your deduction on your tax returns:

• Enter your details (including VIN) on Schedule 1-A, Part IV, and file it with your Form 1040.
• For tax year 2025, lenders may not file a new IRS information return yet, but they still must provide borrowers a statement showing total qualifying interest paid — available by Jan. 31, 2026.

Bottom line

If you already planned to buy a new vehicle and you qualify, the deduction could put a little money back in your pocket at tax time. But for many borrowers, the savings are likely hundreds, not thousands, and it’s usually not worth choosing a different car (or borrowing more) just to chase the break.

FAQs

Is car loan interest tax deductible under OBBB?

Yes. For 2025 through 2028, if the loan/vehicle/personal-use rules are met and you’re within the income limits.

Do I have to itemize?

No. The IRS says it’s available to both itemizers and non-itemizers.

Are leases eligible?

No. the IRS explicitly says lease payments don’t qualify.

What if I refinance my auto loan?

The IRS says interest on the refinanced amount is generally eligible if the original loan qualified.