The Freight RAILCAR Act of 2025 creates a tax credit to encourage railroad companies to replace old freight cars with new, more efficient ones or to modernize existing cars. Here's how it works: companies can claim a tax credit equal to 10 percent of what they spend on buying new freight cars or upgrading old ones, but they're limited to claiming the credit for no more than 1,000 railcars per year.

To qualify for this credit, a company must scrap at least two old freight cars from their fleet and replace them with one new, more efficient car. The new car has to be built after this law passes and ordered within three years. The upgraded or new cars must show real improvements—either 8 percent more cargo capacity or they need to meet specific safety and performance standards set by railroad and hazmat safety organizations. The cars also have to be built at facilities that meet certain standards.

There are some restrictions to prevent abuse: companies can't claim the credit if they quickly buy and lease back the same railcar, and they can't get this credit if they're already getting another tax break for the same expense. The credit only applies to railcars put into service within three years of the law taking effect. The government will track how many companies use this credit, how many old cars get scrapped, and how many new cars get built as a result, reporting back to Congress within three years.