Millions of car buyers in the US may soon get some tax relief for a provision in the so -called “Big, beautiful bill“The law was signed by President Trump on 4 July.
The idea was to give tax breaks for auto buyers First floated by Mr. Trump On the campaign mark in October, when he promised that such measures “would make the ownership of the car dramatically cheaper for millions and millions of working American families.”
This promise has now become physical as part of a large beautiful bill act, in which new taxes are effective for purchasing a car starting in 2025. But the cut also has an income range that narrows the number of Americans that can claim it, while car buyers and vehicle leases are not used.
Nevertheless, car buyers who have bought a new vehicle this year or are planning to do so in the next four years can get some relief when they file their 2025 tax returns. The deduction will end in 2028, which means that car buyers can take advantage of the profit for only four tax years.
At the same time, a very beautiful task Eliminates federal tax credit for electric vehicles After 30 September. Tax brakes, which offer $ 7,500 for new EVS and $ 4,000 for used EVS, are credited with helping to make electric vehicles more affordable for many buyers.
What do you know here.
How much is the new auto loan cut?
New tax deduction and expenditure law make capable Car buyers cut off up to $ 10,000 “qualified passenger vehicle loan interest” during the taxable year starting with a purchase of 2025.
While this is similar to the hostage interest cuts available to the owners of the household, there is a big difference: car buyers will be able to do its auto loan interest items, even if they take standard cuts. Comparing, hostage interest deduction is available only to taxpayers who do items.
Which vehicles qualify for cuts?
Tax brakes apply to the purchase of new cars, motorcycles, sports utility vehicles, minivans, vans and pickup trucks, which weigh less than 14,000 pounds (referred to as a light vehicle). The cars used are not eligible.
To qualify for cuts, a vehicle must also be assembled in the US, which further limits the tax break.
The cut also applies to vehicles purchased for individual use, not for fleet or commercial purposes. And it excludes the autos that are leased, which represent one-fourth of all auto sales in the US, According to perceive.
What are the income boundaries for auto loan cuts?
The full break can be claimed by single taxpayers with a modified adjusted gross income (MAGI) of $ 200,000 or less with a modified gross income (MAGI) of the full break.
Revised adjusted gross income is your adjusted gross income, which can be found on line 11 of your 1040 tax returns, some items such as savings bonds back to interest, added back to interest, According To IRS.
Under the new law, auto loan deduction shrinks for people with magic above those thresholds, reduced the amount above $ 200 for each $ 1,000 in income above those levels. The deduction is perfectly phased for single filers earning above $ 150,000 and married couples with income above $ 250,000.
How many American qualifications will be achieved for car loan cuts?
Jonathan Smoke, the chief economist at the Cox Automotive, said the estimated 3.5 million new vehicle loans may be eligible for tax breaks this year, if purchasing patterns remain the same and except for commercial vehicles and customers above the income cutoff, Jonathan Smoke said, the main economist of COX Automotive.
According to Cax data, about 60% of the 15.9 million new light vehicles sold last year were funded with auto loans.
How much will the car loan cuts save on my taxes?
It depends on the size of your auto loan and whether you fall below the income range for new tax brakes, but specific car buyer can save hundreds per year on their taxes.
The average new vehicle loan is financed about $ 44,000 in six years. Interest rates vary by the customer, so there will also be savings. In general, tax deduction will decline after the initial year as interest payments on loans are front-loaded, while major payments grow at the back ends.
Car buyers who qualify for an auto loan rate of about 6.5%are usually available to consumers with high credit scores, can cut $ 3,000 in the first year of their car and then about $ 1,800 per year, for the remaining loan, According American Financial Services Association, a consumer credit industry business group.
The deduction reduces the taxable income of a filer, which helps reduce their tax burden. For example, a person in a 22% tax bracket can save $ 660 on his taxes by claiming $ 3,000 auto loan deduction.
Smoke said that 9.3% interest rate – One of people with a subprime credit score – an average new vehicle buyer can save about $ 2,200 on taxes in four years.
Contributed to this report.
