IRS releases guidance on car loan interest under OBBBA

The Treasury and the Internal Revenue Service have released proposed regulations on the “No tax on car loan interest” provision enacted under the One Big Beautiful Bill Act.

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The proposed regulations relate to a new deduction for interest paid on vehicle loans incurred after Dec. 31, 2024, to purchase new made-in-America vehicles for personal use. (This new benefit applies to both taxpayers who take the standard deduction and those who itemize deductions.)

The guidance addresses eligibility criteria, including:

• What new vehicles are eligible for the deduction, including rules for determining if the final assembly of a vehicle occurred in the United States;
• How to determine which vehicle loans qualify and the amount of interest paid on a loan that may be deductible;
• Rules for determining if a new vehicle is purchased for personal use; and,
• Identifying taxpayers who can take the deduction and clarifying the $10,000 annual deduction limit.

The IRS is looking for comments from the public on these proposed regs; they can be submitted until Feb. 2 through Regulations.gov; instructions are available in the proposed regulations.