Car Loan Tax Deduction: Who and What Qualifies

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Getting yourself a car loan tax deduction always sounds nice, especially at the end of the year during tax season. We all want to save a bit of money each spring, and when considering a car loan tax deduction, there are things you need to be aware of. Today, your friends at Granite Hyundai are here to explain what a car loan tax deduction is and who and what qualifies. Of course, you always want to review important tax information with a certified tax expert, but we're here to clarify this topic for you as best as we can. Keep reading below to learn more!

Made-in-America Car Loan Tax Deduction

Due to recent policy changes, there are better incentives to buy a car primarily made in the United States. The Made-in-America Car Loan Tax Deduction is a new federal tax break enacted as part of the One Big Beautiful Bill (OBBB), which was signed into effect in July of this year. That means any vehicles purchased after the law took effect, after December 31, 2024, that meet the criteria will be eligible for a tax deduction. It's also worth mentioning that you can deduct as much as $10,000 in interest paid on qualifying auto loans due to this law.

To qualify, you should meet these requirements: Cars, minivans, SUVs, pickup trucks, and motorcycles weighing less than 14,000 pounds with final assembly in the United States are eligible.

The One Big Beautiful Bill

The One Big Beautiful Bill is a U.S. tax and spending bill signed into law on July 4, 2025, which includes various benefits for those shopping for vehicles made mainly here in the United States. Although not primarily targeted towards car buying, the OBBB consists of a car loan tax deduction of up to $10,000 on interest paid per calendar year. It also applies to vehicles purchased between 2025 and 2028. Therefore, it is not a permanent tax break for Americans, but it will run for the next few years.

Eligibility for the OBBB Car Loan Tax Benefit

Regarding your eligibility for the OBBB car loan tax benefit, there are a few things that must be met before you can claim these deductions from your 2025 taxes. These include:

• The car must be a new vehicle.
• Final assembly must happen in the United States.
• Your car must be for personal use.
• Must have a gross vehicle weight rating of less than 14,000 pounds.
• Must not be a lease; you have to purchase the vehicle.
• The loan must have originated after December 31, 2024.

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How Much Can You Save?

You can save up to $10,000 in deductions with the One Big Beautiful Bill's Made-in-America Car Loan Tax Deduction. You cannot deduct more than $10,000 for your vehicle loans.

Which Hyundai Vehicles are Eligible?

Although Hyundai is not an American car brand, there are plenty of models and trims across the lineup that qualify for a car loan tax deduction. We will break this down for you below:

• Hyundai Santa Fe: SE, SEL, XRT, Limited, and Calligraphy trims (assembled in Hyundai Motor Manufacturing Alabama).
• Hyundai Tucson: SE, SEL, SEL Convenience XRT, and Limited trims (assembled in Hyundai Motor Manufacturing Alabama).
• Hyundai Santa Cruz: SE, SEL, SEL Activity, XRT, and Limited trims (assembled in Hyundai Motor Manufacturing Alabama).
• Hyundai IONIQ 5: SE Standard Range, SE, SEL, XRT, and Limited trims (assembled in Hyundai Motor Group Metaplant America). The IONIQ 5 is not available at Granite Hyundai.
• Hyundai IONIQ 9: S, SE, SEL, Limited, Calligraphy, Calligraphy Design trims (assembled in Hyundai Motor Group Metaplant America). The IONIQ 9 is not available at Granite Hyundai.

Questions to Ask Us When Shopping

When you go shopping for a new Hyundai, the first question you want to ask about car loan tax deductions is which models qualify. We can show you what inventory can be applied to this tax break, and our team will be happy to work with you to find the perfect vehicle that is assembled here in the United States. Another good question to ask during this process is whether the electric car of your choice qualifies for the federal EV tax credit. This is an additional benefit to shopping for a US-assembled and eco-friendly vehicle.

Important: This deduction is for personal-use vehicles only, not business or commercial vehicles.

Steps to Claim the Car Loan Interest Deduction

The steps you will follow to claim the car loan interest deduction are as follows:

• Check your loan documents for dates and interest amounts.
• Gather all necessary documentation proving payments.
• Calculate your deduction amount (up to $10,000).
• Report your deduction to the IRS using the specific form.
• Consult with a tax professional before filing.

Reasons to Claim the OBBB Car Loan Tax Deduction

The number-one reason you want to claim the OBBB car loan tax deduction when shopping for a new car with Hyundai is to save money! By paying interest on your car loans, you can deduct that from your taxes between 2025 and 2028, which can help ease the burden of taxes each spring. Much like with student loan debt being tax-deductible, the Big Beautiful Bill has made auto loan payments another qualifier for better savings.

Car Loan Tax Deduction FAQs

Below, we want to address some common questions that shoppers have about the car loan tax deduction. You might find this process and new law confusing, and that is totally understandable. Anytime there is a significant change in tax law and deductions, questions are sure to follow.

What Types of Loans Qualify?

Auto loans are what qualify for the car loan tax deduction. You cannot use a lease or interest from a car lease for this government incentive. Refinancing may only be eligible for the deduction on interest paid on the original qualifying loan.

Is Refinancing an Option Later?

Yes, you can refinance down the line. However, there are rules you will need to follow when doing this to still qualify for the tax deduction. They include:

• The deduction only applies to the amount of the original loan still owed at the time of refinancing.
• The refinanced loan must remain secured by the same vehicle.

Of course, this can change, so it is best to stay up to date with the latest IRS guidelines and consult a tax professional before making any claims or deductions during your tax filing.

What Is the Maximum Annual Deduction?

The maximum annual deduction through the Made-in-America Car Loan Tax Deduction is $10,000 in interest paid on your qualifying loan. You will not be able to claim more than this amount, even if you are paying more than $10,000 in annual vehicle loan interest. This is also only applicable for those using their vehicle for personal reasons and cannot be applied to business models purchased for employees/contractors.

Does Income Affect Eligibility?

Yes, income will affect eligibility for the car loan tax deduction. As part of the One Big Beautiful Bill, you can only deduct the $10,000 if you are making less than a modified adjusted gross income (MAGI) over $100,000 or for married couples filing jointly with a MAGI over $200,000. If you make more than $100,000 individually or $200,000 as a married couple, this deduction will phase out, rather than disappear entirely. For instance, it's reduced by $200 for every $1,000 of MAGI above the limits.

Note: The deduction is completely phased out at higher MAGI thresholds, which are $150,000 for single filers and $250,000 for joint filers.

Can I Also Use the EV Tax Credit?

Yes! Both credits can be applied, as long as the EV you buy is assembled here in the United States. One of the main concerns of this car loan tax deduction is whether a vehicle is mainly produced here in the USA, so your tax credit for an electric car and loan interest deduction depend heavily on the location of production and assembly. Hyundai has multiple plants in the United States and continues to expand its US-based production presence.

Our team at Granite Hyundai is always happy to review this with you, so please do not hesitate to see us in Somersworth, NH. We have the answers to your questions, and we would love to schedule a test drive for you.

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Speak to a Financing Expert Today

The best thing you can do when buying a new car in 2025 is to speak to a financing expert about your options with all of the Big Beautiful Bill's changes to tax law and clean vehicle incentives. There has never been a better time to purchase a car, electric or not. When you choose Hyundai models assembled in the USA, you get excellent tax deduction opportunities, as well as potential savings beyond these deductions and credits. You also want to work with a tax professional when filing and deducting your interest payments to ensure you are doing everything correctly. We can help you get the car-buying process started as soon as today here in Somersworth, NH. Contact us or swing by our dealership today to get the process started.