Certain tax benefits and deductions, including a deduction on federal taxes for interest paid on the purchase of qualifying new cars during 2025, are being made possible through legislation that was passed into law by the federal government in July 2025.

These include changes in taxpayers’ standard deduction, no taxes on a specified range of tips and overtime incomes, changes in deductions for state and local taxes (SALT) and seniors, creation of trust accounts for children and a number of provisions that affect businesses.

A feature that could benefit many credit union members could come after the purchase of a new (not previously owned or “used”) vehicle during 2025. Whether you financed through RBFCU or another lender, you might qualify for a deduction on your federal taxes for interest paid during 2025. You can lower your tax bill and make car ownership more affordable.

At RBFCU, year-to-date interest paid can be found on monthly loan statements or by signing in to Online Banking and selecting the loan from the Account Summary.

An article from CBS News states “car buyers who have bought a new vehicle (in 2025) or are planning to do so in the next four years may get some tax relief when they file their 2025 tax returns. The deduction will expire in 2028, which means car buyers can only take advantage of the benefit for four tax years.”

The deduction is available for both itemizing and non-itemizing taxpayers. Here are some points to consider:

• Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. Lease payments do not qualify.
• Maximum annual deduction is $10,000.
• Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
• To qualify for the deduction, the interest must be paid on a loan that is:
  • Originated after Dec. 31, 2024
  • Used to purchase a vehicle originally used by the taxpayer (previously owned or “used” vehicles do not qualify)
  • For a personal use vehicle (not for business or commercial use)
  • Secured by a lien on the vehicle

Additional points to consider:

• If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.
• A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States.
• To determine if a vehicle had final assembly in the U.S., check one of these:
  • The information label attached to the vehicle on a dealer’s premises
  • The vehicle identification number (VIN)
  • The National Highway Traffic Safety Administration (NHTSA) at nhtsa.gov/vin-decoder

The taxpayer must include the vehicle identification number (VIN) of the vehicle on the tax return for any year when the deduction is claimed.