12/22/2025
With the end of the tax year approaching,
it’s a good time to start thinking about a couple of new tax breaks that may apply to you!
1. Deduction for State and Local Taxes (SALT)
The SALT deduction is not new, but the limit on it was sharply increased by the 2025 Tax Act, from $10,000 in 2024 to $40,000 in 2025. Deductible taxes include state and local income taxes, property taxes on real estate, and personal property taxes (typically on motor vehicles). The SALT deduction is only available if you itemize. If you haven’t itemized in the past, the higher limit on the SALT deduction might make it worthwhile. If you already itemize, your SALT deduction might be much higher. The enhanced SALT limit is phased out if your modified adjusted gross income is over $500,000 ($250,000 for married taxpayers filing separately). If your income is under these amounts, it may be beneficial to pay your 4th quarter state estimated tax payment before 12/31/2025.
2. Deduction for Car Loan Interest
The deduction for car loan interest, which is limited to $10,000 per year, is available for loans taken out after December 31, 2024 to buy certain motor vehicles for personal use. The deduction is allowed regardless of whether you itemize your deductions or take the standard deduction. However, it’s phased out if your modified adjusted gross income exceeds $100,000 ($200,000 in the case of a joint return).
For the interest to be deductible, the loan must be for the purchase of a qualifying motor vehicle (officially, an “applicable passenger vehicle”). Several requirements must be met for a vehicle to qualify. For instance, the vehicle must:
-Be new.
-Be manufactured primarily for use on public streets, roads and highways.
-Be either a car, minivan, van, sport utility vehicle, pickup truck or motorcycle.
-Have a gross vehicle weight rating of less than 14,000 pounds.
-Have is final assembly in the U.S.
To get initial information on whether a vehicle is assembled in the U.S., a good starting point is googling “where is the [car make/model] assembled for the U.S. market.” But always confirm the information with the dealer.
For car loan interest to be deductible, the loan must have been taken out after December 31, 2024, and be secured by the first lien on the vehicle. The loan cannot be from a related party such as a family member. The deduction for car loan interest is phased out if your modified adjusted gross income exceeds $100,000 ($100,000 in the case of joint filers).
Merry Christmas and Happy New Year to all!!
