Auto Loan Tax Deduction: What You Need to Know

If you’re in Sycamore, Illinois, buying a new Chrysler, Dodge, Jeep, or Ram just got even more rewarding. Beginning in 2025, the federal government is rolling out the Auto Loan Tax Deduction, which allows qualifying drivers to deduct up to $10,000 per year on their taxes when financing a brand-new, U.S.-assembled vehicle.

Picture yourself cruising down Illinois Route 64, commuting toward DeKalb or Chicago on I-88, or enjoying a weekend at Sycamore Lake Rotary Park or exploring the historic downtown district—now with extra savings thanks to this tax break.

Even better, some of today’s most popular models are already on the IRS’s eligibility list, including favorites like the Jeep Grand Cherokee, Ram 1500, Dodge Durango, and Chrysler Pacifica. That means Sycamore-area drivers have excellent opportunities to save big at tax time while upgrading to a brand-new ride from Kunes CDJR of Sycamore.

• You’re buying a new vehicle (cars, SUVs, pickup trucks, minivans, motorcycles).
• The car is assembled in the U.S. and has a VIN you report on your tax return.
• The loan is a first lien auto loan (not a lease, not a refinance beyond your original amount, not a second mortgage).
• It’s for personal use (not business, fleets, or company cars).

• Up to $10,000 per year on your taxes.
• If your income is over certain limits, the deduction phases out:
  • Over $100,000 for individuals.
  • Over $200,000 for couples filing jointly.
  • Fully phased out at $150,000 (single) / $250,000 (joint).

• Used cars or leases (sorry, only brand new).
• Business or fleet vehicles.
• Cars with salvage titles or those bought for parts.
• Loans from family or related parties.

• For auto loans started January 1, 2025 – December 31, 2028.
• After 2028, the deduction is set to expire unless Congress extends it.

• Keep your loan paperwork and VIN info.
• Report the VIN on your tax return.
• Keep proof the car was assembled in the U.S. (IRS provides a list of qualifying vehicles).
• Be ready in case the IRS asks you to show documents.

1. Don’t assume every new car qualifies — check the IRS eligibility list before you buy.
2. Remember: this is a deduction, not a rebate. It lowers your taxable income, not your loan payment.
3. The IRS may audit, so keep your records safe.

Have more questions? See your local tax epert.