Thanks to a recent change in US federal tax law, you can now deduct up to $10,000 per year in interest paid on a car loan, as long as the vehicle is new and assembled in the U.S. This deduction is available from 2025 until 2028, and it applies whether or not you itemize your taxes*. It's a win-win scenario.
What vehicles qualify?
To take advantage of this deduction, your car loan and vehicle must meet a few key criteria:- The loan must have been signed on after January 1st, 2025.
- The vehicle must be brand new (not used) and for personal use only.
- The loan must be secured by the vehicle (not a personal loan).
- The vehicle must have undergone final assembly in the U.S. You can check this using the NHTSA VIN decoder located here; it provides clear instructions for use.
What could this mean for you?
Let's say you finance a $35,000 new car with a fixed-rate vehicle loan at OAS FCU and pay $2,800 in interest in 2025. If the vehicle qualifies and your income is below the threshold, you could deduct the full $2,800 from your taxable income. This would save the average taxpayer in the US around $616 in taxes a year.And if you pay more interest in future years (up to $10,000 annually), you will continue to deduct it through 2028.
Why this matters
Buying a car is one of the biggest financial decisions you will make in the next few years. This new deduction helps ease the cost of borrowing, especially at a time when interest rates have been higher than usual. Think of it as a yearly rebate.It is also a reminder that where your car is assembled matters. Choosing a vehicle built in the U.S. not only supports domestic jobs, it also supports your bottom line.
One more thing…
If you are planning to buy a new car soon, we are here to help. Our new fixed-rate car loan rates are designed to give you peace of mind and predictable payments. And if you buy now, you're just in time for this new deduction to kick in.* For all tax matters please consult a certified tax advisor.
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