Sponsors (2)
The bill provides temporary, targeted tax relief for many middle-income car buyers by allowing up to a $10,000 interest deduction, but it adds reporting and administrative burdens, leaves higher‑income filers with reduced or no benefit, and creates uncertainty unless extended.
Buyers of qualifying passenger vehicles can deduct up to $10,000 of loan interest per year for 2025–2028, reducing their taxable income.
Middle-income filers receive a larger share of the benefit because the deduction phases out only above $100,000 AGI ($200,000 joint), concentrating relief on non‑high earners.
Owners who refinance a qualifying vehicle loan (if the refinancing is secured by a first lien and does not exceed prior debt) can still claim the interest deduction, letting some borrowers preserve the benefit after refinancing.
Taxpayers with modified adjusted gross income above the phaseout thresholds will see the deduction reduced or eliminated, adding complexity to tax planning and limiting who benefits.
Lenders and private sellers who receive $600 or more in interest must file new information returns, creating compliance and reporting burdens for small lenders, community banks, and private sellers.
The deduction is temporary (limited to 2025–2028), creating uncertainty for prospective and recent buyers and risking unequal treatment across tax years if Congress does not extend it.
Based on analysis of 2 sections of legislative text.
Creates a temporary deduction (cap $10,000/yr) for interest on qualifying personal passenger vehicle loans for 2025–2028, phased out by income.
Official title: 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.
Introduced May 15, 2025 by Mike Kelly · Last progress May 15, 2025
Creates a temporary federal tax deduction for interest on certain car loans used to buy passenger vehicles for personal use, allowing up to $10,000 of deductible interest per year for qualifying loans made after December 31, 2024 and before January 1, 2029. The benefit phases out for higher-income taxpayers and excludes many commercial, lease, salvage, and related-party transactions, and adds reporting categories for the new deduction.