The new personal car loan interest deduction (up to $10,000/year) is changing the way small business owners should think about vehicle write-offs.
Before 2025, your choices were:
Buy the vehicle personally → maybe get mileage reimbursement
Buy through your business (LLC/S-Corp) → get depreciation, Section 179, and business interest
Lease personally → limited deduction options
Now, the math has changed.
What’s New for 2025–2028
You can now deduct car loan interest on your personal tax return, even for personal-use vehicles, as long as:
The vehicle is new
Final assembled in the U.S.
You meet the income thresholds
You report the VIN
That means you can potentially:
Buy the car in your personal name
Deduct interest up to $10,000/year under the new law
Track business miles separately and still get the $0.67/mile deduction (2024 rate, updated yearly)
Skip the added cost of commercial auto insurance, business financing, or asset titling
Strategy: Combine Personal Interest Deduction + Mileage Reimbursement
This might now be the most tax-efficient and administratively simple option for many S-Corp or LLC owners, uou’ll need to track business mileage and ensure personal interest meets IRS rules, but it’s entirely viable.
Watch for These Gotchas
Only interest is deductible, not the principal
Vehicle must be new and assembled in the U.S.
Income phaseout starts at $100K (single) or $200K (MFJ)
You must report VIN on your return
You can’t double-dip: If the business claims full depreciation, you can’t also take the personal interest deduction
Final Thoughts
If you’re an S-Corp owner thinking about a new vehicle:
Run the numbers — especially if your AGI is under the threshold
Consider buying personally, deducting interest, and using accountable plan mileage reimbursements
This may produce more tax savings than buying through the business
Want help modeling which path saves you more? We’ll walk you through both scenarios — and adjust your payroll/accountable plan if needed.