The IRS code defines a qualified vehicle as a new car, minivan, van, SUV, pick-up truck  or motorcycle, with a gross vehicle weight rating (GVWR) less than 14,000 pounds and that has undergone final assembly in the United States.

According to the IRS, the loan interest must also be qualified, which requires the interest must be paid on a loan that is:

• originated after December 31, 2024, and before January 1, 2029,
• used to purchase a vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify),
• for a personal use vehicle (not for business or commercial use) and secured by a lien on the vehicle.

• The IRS relies on the NHTSA VIN database to confirm the plant code and country of final assembly.  This VIN decoder also provides the GVWR weight rating.
• Both can also be found on the manufacturer’s certification label (usually inside the door jamb).

The IRS has stated that if a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for deduction.  Key requirements for a refinance loan to be eligible is that the qualified vehicle’s ownership must remain the same  as the original purchaser.  Once the ownership changes on a vehicle, it may no longer be qualified.

According to the IRS, lease payments do not qualify for the deduction.  Lease buyouts are not likely to qualify either as they involve a change in ownership and would possibly classify the vehicle as used at the time of the new loan used to process the buyout.

The IRS has specified that you may deduct the full amount of interest paid during the calendar year on qualified loans up to a maximum of $10,000.  There are modified adjusted gross income limitation which may reduce or possibly eliminate filer’s eligible deduction amount.  Please click here for further information about this deduction, as well as other OBBBA provisions.

We must refer you to a professional tax preparer or the IRS for official tax advice. However, our staff can assist you with determining the amount of interest paid for the calendar year of 2025 on a vehicle loan that you believe to be qualified.  If your loan still had a balance at the end of the year, this information can be found on your December statement for easy reference.