If you purchased a new vehicle and financed it, you may be eligible for a valuable federal tax deduction that most people have not yet heard about. The One Big Beautiful Bill Act (OBBBA), signed into law in the summer of 2025, created a new temporary deduction of up to $10,000 for qualifying auto loan interest. Available for the 2025 through 2028 tax years, the deduction applies regardless of whether you itemize on your return. But eligibility depends on a range of factors, from where your vehicle was assembled to your household income. The IRS has already issued proposed regulations to clarify how the deduction works, and taxpayers who plan to claim it should be prepared to meet specific substantiation requirements.

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