Auto Interest Deduction Proposal

The House-passed draft tax legislation would create a new above-the-line deduction of up to $10,000 for "qualified passenger vehicle loan interest" per year. The deduction phases out starting when the taxpayer’s modified adjusted gross income (MAGI) exceeds $100,000 ($200,000 for joint returns). An "applicable passenger vehicle" that qualifies for the interest deduction is defined as one that is (1) manufactured primarily for use on public streets, roads, and highways, (2) has at least two wheels, (3) is a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle, if (4) the final assembly of the vehicle occurs in the U.S. The deduction proposed would be temporary and allowed from tax years 2025 through 2028.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the Trump administration’s plan to introduce a new deduction for interest on car loans.

Below is a summary of the debate that ensued between the two professors.