Professional Corporation
Vehicle Purchase Tax Strategies Under the OBBBA
[1] Personal Vehicle Purchases: Tax Strategies
✅ Available Deduction:
Auto Loan Interest Deduction
Item | Details |
Eligible vehicles | Vehicles finally assembled in the United States, including electric vehicles but excluding used vehicles |
Purpose of use | Personal use; business vehicles are excluded |
Deduction limit | Up to $10,000 of auto loan interest annually |
Filing treatment | An above-the-line deduction, available regardless of whether you claim the standard deduction or itemize |
Income thresholds | Individual: phaseout begins when MAGI exceeds $100,000 Married filing jointly: phaseout begins when MAGI exceeds $200,000 |
Effective period: temporarily available for 2025–2028. Leased vehicles do not qualify. |
🔍 Strategy Summary:
A U.S.-assembled vehicle financed with a loan and used personally can qualify, whether electric or gasoline-powered.
The separate $7,500 EV credit applies through September 30, 2025, and may be combined with the interest deduction.
The vehicle registration and loan must be in the same name.
Reference: A $50,000 vehicle financed at 7.24% over 5 years has first-year interest of $3,620. A vehicle purchase price of approximately $138,000 would be needed for the maximum $10,000 interest deduction.
[2] Business Vehicle Purchases: Tax Strategies
✅ Available Deduction:
100% Bonus Depreciation, made permanent under the OBBBA after January 20, 2025
Item | Details |
Eligible vehicles | Vehicles used at least 50% for business, including passenger cars, SUVs, and trucks |
Deduction method | The entire purchase price can be depreciated at 100% in the first year |
Examples of eligible vehicles | GVWR over 6,000 lb: large SUVs and pickup trucks may qualify for a full deduction GVWR of 6,000 lb or less: subject to IRS depreciation caps, approximately $20,000, plus or minus |
Both new and used vehicles qualify, provided they are new to the business’s use. Leased vehicles are ineligible. Filing Form 4562 is required for accounting treatment. |
🔍 Strategy Summary: Purchasing a vehicle with GVWR over 6,000 pounds can provide tax savings on a scale of hundreds of thousands of dollars. Used vehicles also qualify, making this very favorable for capital investment from 2025 onward.
📊 Personal vs. Business Use: Comparison
Category | Personal use | Business use |
Deduction type | Auto loan interest deduction | Bonus depreciation |
Deductible amount | Loan interest, up to $10,000 | Full vehicle price, 100% |
Vehicle requirements | Final assembly in the United States | At least 50% business use |
Vehicle types | Sedans, SUVs, and electric vehicles | SUVs, pickups, specialized machinery vehicles, etc. |
Leased vehicles | ❌ Ineligible | ❌ Ineligible |
Electric vehicles | ✅ Interest deduction and EV credit may both apply | ✅ EV credit is excluded from the depreciable amount |
Effective period | 2025–2028, temporary | January 20, 2025 onward, permanent |
📝 Example Tax-Saving Scenarios
[Personal Use]
Purchase a U.S.-made electric vehicle for $50,000 with financing before September 30, 2025
→ A $7,500 EV credit plus approximately $2,500–$4,000 in additional tax savings from the interest deduction
[Business Use]
Purchase a $90,000 SUV over 6,000 lb between January 20 and December 31, 2025, entirely for business use
→ 100% depreciation allows the entire $90,000 to be expensed
→ Approximately $18,900 in tax savings at a 21% corporate tax rate
Purchase a U.S.-made electric vehicle over 6,000 lb for $90,000 between January 20 and September 30, 2025
Bonus depreciation: immediately expense the full $82,500 ($90,000 minus $7,500), reducing corporate tax by approximately $17,325 at a 21% rate
EV tax credit: an additional direct $7,500 credit
Total tax savings: $24,825
U.S.–Korea Tax & Accounting Support
Planning U.S. expansion or reviewing a cross-border tax or accounting matter? Speak with our U.S.–Korea team.