F&I

Car-loan interest deduction rules take effect today

The IRS's final regulations on the new deduction for qualifying car-loan interest (T.D. 10054) are effective Nov. 9, per the Federal Register; they also set reporting duties for businesses that receive $600 or more of that interest from an individual in a year. The deduction itself covers tax years 2025 through 2028 for loans taken out after Dec. 31, 2024. In a Nov. 3 tax tip, the IRS reminded buyers that the vehicle must be new, finally assembled in the U.S. and for personal use, that leases don't qualify, and that the deduction (up to $10,000 a year) phases out above $100,000 of modified adjusted gross income ($200,000 for joint filers). It is a deduction, not a credit, so the savings depend on each buyer's tax situation. Stores should avoid presenting the maximum deduction as a guaranteed discount or payment saving.

Possible industry effect: Give customers the eligibility rules and refer them to their own tax adviser rather than promise a tax saving.

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