If you usually find “tax law changes” to mean “more reading and more rules,” good news: there are some potentially helpful updates in the OBBBA that apply to you—especially if you bought a car this year.
1. Car-Loan Interest Deduction for 2025
What’s new:
Because of the OBBBA, for tax years 2025 through 2028, individuals may deduct interest on certain car loans—even if they take the standard deduction.
Key rules you should know:
Vehicle must be a new applicable passenger vehicle, purchased in 2025 or later, and must have been final-assembled in the U.S.
The deduction is capped at $10,000 of interest paid per year.
The deduction begins to phase out when Modified Adjusted Gross Income (MAGI) exceeds $100,000 for single filers and $200,000 for joint filers.
It’s available whether you itemize or not (i.e., even if you take the standard deduction).
What this means for 2025 (filing in 2026):
You can claim this deduction for interest paid in 2025 (assuming all requirements are met).
However, the IRS/official regulations are still being developed, so it’s a good idea to keep thorough documentation.
Documentation you’ll need:
The loan statement showing interest paid in 2025.
Proof that the vehicle meets the “final assembly in U.S.” requirement — often the manufacturer’s label will list “Final Assembly: [City, State, USA].”
Proof the vehicle is a “qualified passenger vehicle” (i.e., meets definitions under the law).
Your mileage/use log if part of the vehicle is for business vs. personal (though the rule is focused on personal use vehicles, be sure it meets the statute’s criteria).
Your MAGI calculation for 2025, so you can determine if your deduction is subject to phase-out.
Note: If you refinance the loan later, interest on the refinanced amount may also qualify (if rules are followed).
Plan for your 2026 Returns by including charitable donations in your 2026 budget!
2. Charitable Donations – Above-the-Line & Other Deduction Changes
After years of taking a standard deduction, thus not providing your tax preparer with your charitable donations- things will be changing in 2026!
Under the OBBA, you can deduct donations even if you don’t itemize, and there are some changes for itemizers.
What the rule actually says (and when it takes effect):
The OBBBA does include a permanent above-the-line charitable deduction (i.e., available to taxpayers who don’t itemize) of $1,000 (single) / $2,000 (married filing jointly).
This above-the-line deduction is effective for tax years beginning after December 31, 2025** (i.e., 2026 returns).
For taxpayers *who itemize*, starting tax years after December 31, 2025 (so again 2026+), the law imposes a floor: only charitable contributions in excess of 0.5% of AGI are deductible.
Also, for itemizers, there’s a cap on the value of itemized deductions for high marginal rate taxpayers (the benefit of donations may be limited to the 35% tax bracket rather than higher). (More guidance should be forthcoming from the IRS)
What this means for 2025 (filing in 2026):
For 2025 donations, the old rules for charitable contributions apply (i.e., the “pre-OBBBA” rules). So if you make a donation in 2025, you can plan under the existing itemizing rules.
The new above-the-line deduction for non-itemizers will *not* be available until 2026.
The new floor (0.5% of AGI) for itemizers also kicks in 2026. So if you anticipate large charitable gifts and currently itemize, 2025 might be a good year to give.
Documentation you’ll need for charitable donations:
A written acknowledgment from each qualifying charitable organization (must include date of donation, amount, and statement whether any goods or services were provided in return).
For cash/check/card donations: keep receipts, bank statements, or credit card statements.
For non-cash donations: get a qualified appraisal (if required), list fair market value, and keep donation receipts.
Confirm the organization is a qualified 501(c)(3) charity. (You can check an organization’s nonprofit status here)
For large gifts (especially if you itemize), keep your records together and consider timing (e.g., if you give in December 2025 vs January 2026).
Remember:
Records are your friend: loan statements, final-assembly labels, receipts, acknowledgments—all those matter.
We’re always here to talk through your specific situation (income, vehicle, donation timing)!
