Car loan interest may be tax deductible under certain conditions, thanks to a provision in recent legislation. Here’s a summary of the key points:

A new tax break, potentially established by the "One Big Beautiful Bill Act" (OBBBA), could allow eligible car buyers to deduct up to $10,000 per year in interest paid on qualifying new car loans.
This deduction is temporary, available from 2025 through 2028.
You are not required to itemize deductions to claim it—this is considered an "above-the-line" deduction.

However, there are important restrictions:
- The vehicle must be new and assembled in the United States.
- Income limits apply: the deduction phases out for individuals earning over $100,000 and married couples earning over $200,000.
- Certain vehicles, such as ATVs, trailers, and campers, are excluded.
- Used cars do not qualify for the deduction, according to tax experts reviewing the Senate version of the bill.

Business Use:
If you use your car for business as a self-employed individual or business owner, you may still be able to deduct a portion of car loan interest as a business expense, separate from the new temporary deduction. The deductible amount is based on the percentage of business use, determined by the proportion of miles driven for business purposes. Keeping detailed records—such as a mileage log and loan statements—is essential to support this deduction.

Additional Considerations:
- The new tax break is scheduled to expire after 2028 unless extended by future legislation.
- Tax deductions generally provide greater benefits to those in higher tax brackets.
- State tax laws regarding car loan interest may differ and could affect your overall savings.

In summary, a new temporary deduction for car loan interest is available from 2025 to 2028 for qualifying new, U.S.-assembled vehicles, but it comes with several limitations. Business owners and self-employed individuals may still deduct interest based on business use, but should keep thorough records and consider consulting a tax professional.