OBBB Strategy: New Car Loan Interest Deduction vs. Business Use Deductions — What’s Better for SMB Owners?

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.