If you purchased a vehicle in 2025, your tax return may look different this filing season.

The passage of the One Big Beautiful Bill Act (OBBBA) has introduced two potential opportunities for taxpayers: a new deduction for personal auto loan interest and the restoration of 100% Bonus Depreciation for business entities.

However, strict dates and income limits apply. For some taxpayers, these changes will provide a nice boost, but for others, the benefits may be limited. As a leading Visalia CPA & Enrolled Agent firm, Associated Income Tax Services reviews every detail to see exactly where you stand.

Here is a breakdown of who might qualify under the new law.

1. Is My Auto Loan Interest Deductible? (Personal Vehicles)

For the first time in decades, the tax code now allows for the potential deduction of personal car loan interest. However, this is not a guaranteed deduction for everyone. It depends heavily on when you bought the car and how much you earn.

The 4 Factors That Determine if You Qualify:

To see if this deduction applies to your return, we look at the following:

• Date Rule: The loan must have originated after December 31, 2024.Note: If you are paying off a loan from 2023 or 2024, this change sadly won’t affect your return.
• Usage Rule: The vehicle must be for personal use.
• The Cap: The law allows a deduction of up to $10,000 in interest paid.
• Income “Phase-Outs”: This benefit is designed with specific income caps.

• Single Filers: If your income is under $100,000, you likely qualify for the full deduction. Above that, the benefit starts to reduce.
• Joint Filers: If your combined income is under $200,000, you likely qualify. If you earn more than that, the deduction may be reduced or eliminated.

What This Means for You:

Because these phase-out rules can be tricky, we will need to carefully calculate your specific income to see exactly how much of this deduction you can claim.

Confused by the income limits?

Don’t guess. Call us at (559) 625-1339 to schedule an appointment. We can quickly review your income and let you know if you qualify.

2. Business Vehicles: 100% Write-Offs Are Back (For Some)

For our business clients—including Contractors, S-Corps, and Partnerships in the Central Valley—there is a possibility of writing off the entire cost of a vehicle bought in 2025, but it depends on the calendar.

The “January 20” Cutoff:

• Bought BEFORE Jan 20, 2025: If you bought your vehicle early in the year (Jan 1 – Jan 19), you are likely limited to the old 40% write-off rules.
• Bought AFTER Jan 19, 2025: Vehicles bought and put to work after this date may qualify for the full 100% Bonus Depreciation.

The “Contract” Detail:

The IRS looks at the date you signed the contract. If you ordered a truck in late 2024 but it wasn’t delivered until 2025, the old rules might still apply. We will check your paperwork to confirm.

3. Heavy vs. Light: Section 179 & Weight Limits

Even if you qualify for the new deductions, the type of vehicle you bought affects the math. This is where strategies like Section 179 come into play.

• Over 6,000 lbs: Heavy SUVs and work trucks generally allow for larger upfront deductions under Section 179 limits. This remains the most tax-smart way to buy a vehicle for your business.
• Under 6,000 lbs: Standard sedans and smaller SUVs are still subject to annual “luxury auto” caps, though the new law has adjusted these for inflation.

What We Need From You

To determine if these new rules benefit you, please bring the following to your appointment:

• Bill of Sale: We need to see the exact purchase date to check if you fall into the new window.
• Lender Statements: Look for the “Year-End Interest Statement” from your bank or auto lender.
• Vehicle Specs: Knowing the Gross Vehicle Weight Rating (GVWR) helps us find the best deduction strategy for you.

Ready to See Where You Stand?

Tax laws are complex, and “one size fits all” advice doesn’t work. Call us today at  (559) 625-1339 or click below to secure your spot on our calendar. We will determine exactly how these new rules apply to your specific situation.