Big Beautiful Bill changes: EV tax credits, car loan interest, and bonus depreciation

The One Big Beautiful Bill Act (OBBBA) has altered the tax landscape for vehicle buyers. And some changes, like those to the EV tax credit, are going into effect very soon. Whether you’re eyeing an electric vehicle (EV), planning to use your car for business, or wondering if your car loan interest is deductible, you’ll want to know the latest with these tax rules.

We’re here to break down what’s changing and help determine what credits and deductions apply to you. Plus, when it comes to tax time, H&R Block will be here to help you claim your vehicle-related credits and help you get your maximum refund.

Keep reading to find out the latest about:

• EV tax credits
• Car Loan Interest Deduction
• Bonus Depreciation for business vehicles

EV tax credits: 2025 expiration coming soon

You may have heard that the OBBBA will eliminate the Electric Vehicle Credit in 2025.  But what does that mean when you go to file your taxes next year? Does the purchase date of a car bought in 2025 matter? The short answer — yes, it does.

When does the Electric Vehicle Credit end?

The Electric Vehicle Credits effectively ends on Sept. 30, 2025. That means if you purchase a qualifying vehicle before that date, these credits will still be available to you (see list below for credit details). If you purchase an EV on October 1, 2025, or any date after, you won’t be able to claim them on your 2025 or future tax returns.

Claiming EV credits: Time of Sale Report

Along with other documentation to claim the credit, you’ll need to show when you purchased your EV.  You can ask the car dealer for a copy of the Time of Sale Report, which will show the date of sale and other relevant details.

Electric Vehicle Tax Credit 2025: Tax provision recap

While many people think of EV credits as just one tax credit, there were three specific credits created for those buying electric vehicles.  We’ve recapped the benefits and requirements for each of the credits below. 

For a deeper dive of how the credit works, review our Electric Vehicle Tax Credit article.

How will the One Big Beautiful Bill Act affect you?

Check out a breakdown of key changes from the One Big Beautiful Bill Act (OBBBA).

Review OBBBA tax reform changes

New Clean Vehicle Credit

As the name states, this credit is intended for eligible new electric vehicles. Depending on your situation and the car purchased, the New Clean Vehicle Credit could be available to you.

• Up to $7,500 for new EVs
• Income limits apply (e.g., $150,000 for single filers)
• Vehicle must meet battery and assembly requirements
• Credit can be transferred to the dealer at the time of purchase
• Other requirements apply

Used Clean Vehicle Credit

It’s not just new cars covered under the EV tax credit rules. Some purchases of previously owned vehicles could qualify for the Used EV Credit.

• Up to $4,000
• Applies to qualifying used EVs under $25,000
• Income limits and vehicle age restrictions apply
• Other requirements apply

Commercial Clean Vehicle Credit

An EV credit, called the Commercial Clean Vehicle Credit, was created for business owners and tax-exempt owners purchasing electric vehicles. If eligible, you could claim up to $40,000 for qualifying business-use EVs.

Deduction for car loan interest

If you’re in the market for a new car and plan to get financing, a new provision under the Big Beautiful Bill may help you reduce your tax bill starting this year.  The Car Loan Interest Deduction is a new federal income tax benefit that allows individuals to deduct up to $10,000 per year in interest paid.

What’s more, the deduction for car loan interest is above-the-line, meaning it can be claimed whether you itemize deductions or claim the standard deduction. And, if you happen to have purchased and received a loan for more than one car, SUV, etc., you can claim multiple qualifying vehicles.

The new rule does have a few parameters, so not everyone can take it. Below we’ve outlined the key criteria that will determine if you can take this new deduction. 

Let’s dig in!

Key criteria for the deduction for car loan interest

Vehicle requirements:

• Must be a new vehicle as used ones do not qualify.
  • Must be for personal use, so vehicles for commercial or fleet use and leased vehicles do not qualify.
  • Must be a car, SUV, minivan, pickup truck, or motorcycle.
  • Must have final assembly in the United States. You can verify this by checking the VIN—vehicles with VINs starting with 1, 4, or 5 are U.S.-assembled 
  • There are no limitations for the vehicle purchase price.

Loan requirements:

• Must have originated after December 31, 2024. If your loan started in 2025 before the OBBBA became law, you’re able to claim this deduction.
  • Must be a first lien loan—meaning debt that is secured by the vehicle.
  • Refinancing is allowed only if the new loan does not exceed the original principal and remains secured by the same vehicle.

Your income limits:

• Full deduction available for taxpayers with Adjusted Gross Incomes of up to $100,000 (or $200,000 for those Married Filing Jointly).
  • Deduction phases out gradually and is fully eliminated at $150,000 AGI (or $250,000 for those Married Filing Jointly).

Claiming the deduction for car loan interest on your taxes

When you’re ready to file taxes, you’ll want to have a few documents and details at hand. Be sure to store them in a safe place.

To claim the deduction, you should retain your vehicle purchase documents and loan agreements. From these documents, you’ll need to include the Vehicle Identification Number (VIN) on your tax return. 

Additionally, your lender will send you a 1098  reporting vehicle loan interest (or an equivalent) that shows the interest you’ve paid. You’ll plug the numbers from this form into your tax return.

100% Bonus Depreciation: A restored tax break for business vehicles

If you’re a small business owner, self-employed or independent contractor (like a ride share driver) and use your vehicle for business, bonus depreciation can be a helpful tool to lower your taxes. With the One Big Beautiful Bill, 100% bonus depreciation has been reinstated for qualified property (in this case vehicles) purchased after Jan. 19, 2025.

What is 100% Bonus Depreciation?

It allows businesses to deduct the full cost of qualifying assets — including vehicles — in the year they’re placed in service.

Under the bonus depreciation 2025 rules:

• You can apply the deduction to new and used vehicles.
• Your vehicle must be used more than 50% of the time for business purposes. So, if you’re a rideshare driver and you only drive your car 10% of the time for work, you would not be able to claim the credit.

100% Bonus Depreciation example

To make this rule come to life, let’s look at an example. Jaxson’s company purchases a cargo van on March 1, 2025, for $45,000. The van is used 100% for business purposes and is placed in service immediately.

Tax treatment with 100% Bonus Depreciation:

• Because the van is a qualifying asset (tangible property used in business and not subject to passenger vehicle limits), the company can deduct the full $45,000 on its 2025 tax return.
• This deduction is taken instead of depreciating the van over 5 years under the Modified Accelerated Cost Recovery System (MACRS).
• If the company had $100,000 in taxable income before the deduction, the bonus depreciation would reduce it to $55,000, significantly lowering the tax bill for the year.

Take note: This tax deduction is different from a Section 179 deduction, which has its own limits and qualifications. Bonus depreciation is especially useful for high-cost vehicles used in business operations.

Rely on H&R Block for help navigating tax changes

While tax changes can be stressful, you don’t have to go it alone. Trust the expertise of H&R Block to help make sense of your taxes. Make an appointment to file with a tax pro or with H&R Block Online.