Accounting Simplified

"No Tax on Car Loan Interest" Deduction – Did You Know?

The recently enacted One Big Beautiful Bill Act (OBBBA) created a new tax deduction for interest paid on certain car loans. Eligible people who initiate qualifying auto loans after December 31, 2024 may deduct up to $10,000 per year of loan interest, regardless of whether they itemize deductions on their tax returns.

Eligibility criteria for the deduction include income limits, and a requirement that the vehicle be purchased new for personal (not business) driving purposes. In general, to deduct car loan interest in full, a married couple filing a joint return must have a modified adjusted gross income (MAGI) under $200,000. For other filing statuses, the MAGI limit for the full deduction is $100,000. The deduction phases out at higher income levels. Other restrictions include a requirement that the vehicle underwent final assembly in the U.S.

If you qualify for the deduction, you will need to document the amount of auto loan interest you paid. You may receive a year-end tax form from the lender providing this information, but for this year, lenders may make the information available to borrowers in other ways. A tax professional can help you determine whether you qualify to deduct auto loan interest, and if so, help you properly report the interest you paid to get the largest deduction possible.

Work Opportunity Tax Credit Expiring at the End of 2025

The Work Opportunity Tax Credit (WOTC) provides a benefit for employers that hire people who have traditionally faced disadvantages when seeking work. However, the credit is only available through December 31, 2025.

To qualify for the WOTC, an employer must hire one or more individuals from a group specified in the rules for the credit. Those groups include:
- Qualified unemployed veterans (including veterans with disabilities)
- Recipients of public assistance like long-term unemployment, long-term family assistance, SNAP benefits, Supplemental Security payments or Temporary Assistance for Needy Families
- People who live in areas designated as empowerment zones or rural renewal counties
- People referred to vocational rehabilitation programs
- Formerly incarcerated people

The amount of the WOTC is generally based on wages paid to the qualifying worker, and you may claim the credit as part of the General Business Credit. Therefore, the credit is nonrefundable, but any unused credit may be carried forward or back under the usual rules. A business tax professional can help you determine whether your business qualifies for the WOTC, and if so, help you complete all the required paperwork to claim it before it expires.

OBBBA Increased 2025 Standard Deduction Amounts

The recently enacted One Big Beautiful Bill Act (OBBBA) increased the standard deductions that people may claim on their 2025 tax returns above the levels previously announced by the IRS. Here are the new standard deduction amounts based on filing status:

Single or Married Filing Separately (MFS): $15,750, an increase of $1,150 from 2024

Head of Household: $23,625, an increase of $1,725 from 2024

Married Filing Jointly (MFJ) or Qualifying Surviving Spouse: $31,500, an increase of $2,300 from 2024

The OBBBA also increased the enhanced deduction available to people of age 65 or older. Watch for further details on that change and other new deductions in the coming weeks.