This part lets a buyer deduct interest on a car loan. The car must be new, for personal use, and put together in the United States. The break is capped at $10,000 a year and fades above $100,000 of income. It runs for tax years 2025 through 2028.
The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70203 in the PDF
What the document says
“In the case of taxable years beginning after December 31, 2024, and before January 1, 2029, for purposes of this subsection the term `personal interest' shall not include qualified passenger vehicle loan interest.”
The section inserts a new paragraph (4) into section 163(h) of the Internal Revenue Code of 1986, redesignating paragraph (4) as paragraph (5). For taxable years beginning after December 31, 2024 and before January 1, 2029, personal interest does not include qualified passenger vehicle loan interest.
What the document actually says
“In the case of taxable years beginning after December 31, 2024, and before January 1, 2029, for purposes of this subsection the term `personal interest' shall not include qualified passenger vehicle loan interest.”
That sentence, in plain words
For four tax years car loan interest is treated apart. It no longer counts as personal interest. That runs from 2025 through 2028.
What this is about
Personal interest is normally not deductible. Taking car loan interest out of it opens a break. The four years are fixed in the law.
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“the term `qualified passenger vehicle loan interest' means any interest which is paid or accrued during the taxable year on indebtedness incurred by the taxpayer after December 31, 2024, for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use.”
The section defines qualified passenger vehicle loan interest as interest paid or accrued in the taxable year on debt taken on after December 31, 2024 to buy an applicable passenger vehicle for personal use, secured by a first lien on that vehicle. It excludes amounts paid on a loan to finance fleet sales, a loan for a commercial vehicle not used personally, any lease financing, a loan for a vehicle with a salvage title, and a loan for a vehicle meant for scrap or parts.
What the document actually says
“the term `qualified passenger vehicle loan interest' means any interest which is paid or accrued during the taxable year on indebtedness incurred by the taxpayer after December 31, 2024, for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use.”
That sentence, in plain words
The term covers interest paid on a car loan. The loan must have been taken out after December 31, 2024. The car must be for the buyer's own use. The lender must hold a first claim on it.
What this is about
Five kinds of loan are ruled out. Fleet and business cars do not count. Leases do not count. Nor do wrecks or cars bought for parts.
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The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70203 in the PDF
What the document says
“Interest shall not be treated as qualified passenger vehicle loan interest under this paragraph unless the taxpayer includes the vehicle identification number of the applicable passenger vehicle described in clause (i) on the return of tax for the taxable year.”
The section provides that interest is not qualified passenger vehicle loan interest unless the taxpayer puts the vehicle identification number of the vehicle on the return for the taxable year.
What the document actually says
“Interest shall not be treated as qualified passenger vehicle loan interest under this paragraph unless the taxpayer includes the vehicle identification number of the applicable passenger vehicle described in clause (i) on the return of tax for the taxable year.”
That sentence, in plain words
The interest does not count unless one number is on the return. That is the number stamped on the car.
What this is about
Every car carries such a number. Leaving it off means no break. It must go on the return each year.
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The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70203 in the PDF
What the document says
“The amount of interest taken into account by a taxpayer under subparagraph (B) for any taxable year shall not exceed $10,000.”
The section caps the interest that may be taken into account at $10,000 for a taxable year.
What the document actually says
“The amount of interest taken into account by a taxpayer under subparagraph (B) for any taxable year shall not exceed $10,000.”
That sentence, in plain words
No more than $10,000 of interest may be counted. That is the cap for one tax year.
What this is about
Interest above that gets no break. The cap does not grow with prices. It is fixed in the law.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70203 in the PDF
What the document says
“shall be reduced (but not below zero) by $200 for each $1,000 (or portion thereof) by which the modified adjusted gross income of the taxpayer for the taxable year exceeds $100,000 ($200,000 in the case of a joint return).”
The section reduces the deduction, after the cap and not below zero, by $200 for each $1,000 or part of $1,000 of modified adjusted gross income above $100,000, or $200,000 on a joint return. Modified adjusted gross income means adjusted gross income increased by any amount excluded under section 911, 931 or 933.
What the document actually says
“shall be reduced (but not below zero) by $200 for each $1,000 (or portion thereof) by which the modified adjusted gross income of the taxpayer for the taxable year exceeds $100,000 ($200,000 in the case of a joint return).”
That sentence, in plain words
The deduction shrinks as income rises. It drops by $200 for each $1,000 over $100,000. On a joint return the line is $200,000. It never drops below zero.
What this is about
Part of a thousand counts as a whole one. Income here counts some money earned abroad. A high enough income wipes the break out.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“Such term shall not include any vehicle the final assembly of which did not occur within the United States.”
The section defines an applicable passenger vehicle as one whose original use begins with the taxpayer, made primarily for use on public streets, roads and highways and not run only on rails, with at least two wheels, that is a car, minivan, van, sport utility vehicle, pickup truck or motorcycle, treated as a motor vehicle under title II of the Clean Air Act, and with a gross vehicle weight rating under 14,000 pounds. It excludes any vehicle whose final assembly did not happen in the United States. Final assembly means the process by which a manufacturer produces a vehicle at or through a plant from which it goes to a dealer with all the parts needed to run it.
What the document actually says
“Such term shall not include any vehicle the final assembly of which did not occur within the United States.”
That sentence, in plain words
A car does not count if it was put together abroad. Only cars finished in the United States count.
What this is about
The car must also be new to the buyer. It must be built for public roads. It must weigh under 14,000 pounds.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70203 in the PDF
What the document says
“Indebtedness described in subparagraph (B) shall not include any indebtedness owed to a person who is related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer.”
The section provides that debt from refinancing an eligible loan counts where it is secured by a first lien on the same vehicle, but only up to the amount refinanced, and that debt owed to a person related to the taxpayer within the meaning of section 267(b) or 707(b)(1) of the Internal Revenue Code of 1986 does not count.
What the document actually says
“Indebtedness described in subparagraph (B) shall not include any indebtedness owed to a person who is related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer.”
That sentence, in plain words
A loan from a person close to the buyer does not count. The tax code says who counts as close.
What this is about
A new loan that pays off an old one may count. It counts only up to the old balance. It must still be tied to the same car.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“so much of the deduction allowed by section 163(a) as is attributable to the exception under section 163(h)(4)(A).”
The section adds a new paragraph (7) to section 63(b) of the Internal Revenue Code of 1986 so that the part of the interest deduction that comes from the new exception may be claimed by a taxpayer who does not itemize.
What the document actually says
“so much of the deduction allowed by section 163(a) as is attributable to the exception under section 163(h)(4)(A).”
That sentence, in plain words
The part of the interest break that comes from the new rule is named.
What this is about
It is added to a list in the tax code. Items on that list may be claimed without itemizing. So most filers can use it.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall”Who acts: persons engaged in a trade or businessHow: statuteSec. 70203 in the PDF
What the document says
“shall make the return described in subsection (b) with respect to each individual from whom such interest was received at such time as the Secretary may provide.”
The section adds a new section 6050AA to the Internal Revenue Code of 1986 requiring a person in a trade or business who receives $600 or more of interest from an individual in a calendar year on a specified passenger vehicle loan to file a return naming the individual, the interest received, the outstanding principal at the start of the year, the loan origination date, and the year, make, model and vehicle identification number of the vehicle. The filer must also give the individual a written statement with the filer's contact details and that information, on or before January 31 of the following year. The Secretary must issue guidance, including guidance to prevent duplicate reporting, and no return is required for a period the new deduction does not reach.
What the document actually says
“shall make the return described in subsection (b) with respect to each individual from whom such interest was received at such time as the Secretary may provide.”
That sentence, in plain words
The lender must file a return for each borrower. It covers the interest that borrower paid. The Secretary sets when it is due.
What this is about
The duty starts at $600 of interest in a year. The return names the loan and the car. The borrower must get a copy by January 31.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “is amended”Who acts: Secretary of the TreasuryHow: statuteSec. 70203 in the PDF
What the document says
“section 6050AA(a) (relating to returns relating to applicable passenger vehicle loan interest received in trade or business from individuals),”
The section adds the new return to the list of information returns in section 6724(d)(1)(B) of the Internal Revenue Code of 1986 and the new statement to the list of payee statements in section 6724(d)(2), corrects a cross reference in section 56(e)(1)(B), and applies the amendments to indebtedness incurred after December 31, 2024.
What the document actually says
“section 6050AA(a) (relating to returns relating to applicable passenger vehicle loan interest received in trade or business from individuals),”
That sentence, in plain words
The new return is added to a list in the tax code. That list is used for penalties.
What this is about
The new statement is added to a second list. The changes reach loans taken out after December 31, 2024. Older loans are not covered.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
Each distinct thing the section does: take car loan interest out of personal interest for four tax years, define qualified passenger vehicle loan interest with its exceptions, require the vehicle identification number on the return, cap the interest at $10,000, phase the deduction down against income, define an applicable passenger vehicle and require United States final assembly, set the refinancing and related party rules, open the deduction to non-itemizers, create a new reporting return with statements to borrowers, and fix the penalties and the effective date.
The clerical amendment adding an item to a table of sections, and the mechanical edits that strike an and or replace a period so a new item could be added.
The section works by amending the Internal Revenue Code of 1986 and points to title II of the Clean Air Act, neither of which is indexed here, so the surrounding rules cannot be checked against anything on this site.
