Auto Loan Interest Deduction
Auto Loan Interest Deduction
Effective July 4, 2025, the One Big Beautiful Bill Act (OBBBA) introduces significant amendments to federal vehicle incentives, which warrant immediate attention for their potential impact on dealership operations and customer communications.
A new federal auto loan interest deduction allows qualifying customers to save up to $10,000 annually on new vehicle loan interest across all vehicle lines that have undergone final assembly in the United States and have a gross vehicle weight rating (GVWR) of less than 14,000 pounds.
This new federal deduction presents a significant advantage for customers considering a new Ford or Lincoln vehicle. Ford's longstanding commitment, exemplified by its "Ford For America" campaign, ensures that a substantial portion of its vehicle lineup undergoes final assembly in the U.S. Consequently, many Ford and Lincoln models will qualify for this valuable federal tax deduction, offering a direct financial incentive for choosing domestically produced vehicles.
Eligibility
A new federal auto loan interest deduction has been established, offering financial benefits to qualifying customers.
Due to uncertainties surrounding how FCTP vehicles will be treated for purposes of the auto interest deduction, when purchasing a FCTP vehicle a customer should be advised to consult with their tax advisor.
Key provisions of this deduction are as follows:
Deductible Amount
Eligible taxpayers may deduct up to $10,000 in annual interest paid or accrued on loans for qualifying new personal use vehicles effective for 2025 through 2028.
Applicability Period
This deduction applies to new Electric Vehicles (EVs), Hybrid vehicles,and Internal Combustion Engine (ICE) vehicles with loans originating between January 1, 2025, and December 31, 2028.
Qualifiers
To qualify for the deduction, the interest must be paid or accrued on a loan that is:
- originated after December 31, 2024
- 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 the first lien on the vehicle
Vehicle Eligibility - U.S. Final Assembly
To qualify, vehicles must have undergone final assembly in the United States and have a gross vehicle weight rating (GVWR) of less than 14,000 pounds. See the following page for a list of qualifying vehicles
Customer Eligibility
Staff should be prepared to bring awareness to customers regarding potential income eligibility thresholds associated with this deduction. Deduction begins to phase out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers). Eligible customers can include the deduction on their Tax Return.
Eligibility | US-Manufactured Vehicles
The following Ford and Lincoln vehicles have undergone final assembly in the United States.
| US Assembly Plant | Vehicles Produced |
|---|---|
| Michigan Assembly Plant (MAP) | Ford Ranger Ford Bronco |
| Kansas City Assembly Plant (KCAP) | Ford F-150 F-150 Police Responder & SSV Ford Transit Ford E-Transit (personal use only) |
| Kentucky Truck Plant (KTP) | Ford Expedition Ford Expedition MAX Ford Super Duty Lincoln Navigator Lincoln Navigator L |
| Rouge Electric Vehicle Center (REVC) | Ford F-150 Lightning |
| Chicago Assembly Plant (CAP) | Ford Explorer Ford Explorer Police Interceptor Lincoln Aviator |
| Louisville Assembly Plant (LAP) | Ford Escape Lincoln Corsair |
| Flat Rock Assembly Plant (FRAP) | Ford Mustang Coupe/Convertible |
| Dearborn Truck Plant (DTP) | Ford F-150 (Police SSV HEV) |
Information for Dealers
To effectively facilitate customer understanding and utilization of this new incentive, the following actions are recommended:
- Promote Eligible Vehicles: Actively inform customers about the new federal auto loan interest tax deduction on eligible U.S.-assembled Ford and Lincoln vehicles for qualifying purchasers. However, Dealers should not confirm whether a customer will qualify for the deduction.
- Staff Training: Ensure all relevant staff are thoroughly trained to assist customers in identifying eligible vehicles by verifying final assembly.
- Professional Consultation: It is imperative to recommend that customers consult with tax professionals for personalized advice regarding their specific eligibility and to address any tax-related inquiries. The information herein does not constitute tax or legal advice. Customers should consult with their own tax or legal professionals.
- More information: Dealers and customers can visit the IRS website for more information.
How can we help?
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Courtesy Ford of Rome
101 Highway 411 East
Rome, GA 30161
- Sales: (706) 235-4453
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