# What This Bill Does: A Tax Break for Car Loans

This bill would let people deduct the interest they pay on car loans from their federal taxes for the next four years (2025 through 2028). Right now, you generally can't deduct car loan interest—that's considered personal interest, which the tax code doesn't allow. This bill creates a temporary exception to that rule, making car loan interest deductible just like mortgage interest or student loan interest.

Here's who this helps and how much: If you take out a car loan after the end of 2024 to buy a regular passenger vehicle for personal use, you could deduct up to $10,000 of the interest you pay each year. However, there's a catch based on income. If you earn more than $100,000 (or $200,000 if you're married filing jointly), your deduction starts shrinking by $200 for every $1,000 you earn above that threshold. So if you're a single person making $150,000, you'd lose $10,000 of your deduction, meaning you couldn't deduct any car loan interest at all. The deduction only applies to loans on vehicles that were finally assembled in the United States, and it doesn't cover fleet purchases, leases, salvage vehicles, or loans from family members.

The bill also requires lenders to report car loan interest information to the IRS if they receive $600 or more in interest from a borrower in a year. This is similar to how banks report mortgage interest. The deduction is available whether you itemize deductions or take the standard deduction, which makes it more valuable for most people. The whole provision expires after 2028, so this is a temporary tax benefit designed to help people manage car loan costs for the next few years.

To amend the Internal Revenue Code of 1986 to provide for special rules allowing taxpayers to deduct qualified passenger vehicle loan interest paid or accrued during the taxable year on certain indebtedness, and for other purposes.