On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. Among the many tax changes, the OBBBA personal interest deductions stand out because they affect both homeowners and car buyers. The Act makes permanent modifications to the home mortgage interest deduction and introduces a new, temporary deduction for qualified passenger vehicle loan interest.
OBBBA and the Home Mortgage Interest Deduction
Permanent Limits on Mortgage Interest Deductions
Under the Tax Cuts and Jobs Act, homeowners could only deduct interest on up to $750,000 of acquisition debt ($375,000 if married filing separately) for tax years 2018–2025. Higher limits applied if the debt was incurred on or before December 15, 2017.
The OBBBA personal interest deductions make this $750,000 limit permanent for tax years beginning after December 31, 2017. That means:
- Interest on home equity loans remains excluded.
- The $750,000 cap (or $375,000 for separate filers) continues indefinitely.
Mortgage Insurance Premiums
Previously, the deduction for mortgage insurance premiums expired at the end of 2021. Under OBBBA, these premiums are now treated as qualified residence interest for tax years beginning after 2017, further shaping the mortgage interest deduction changes.
OBBBA Car Loan Interest Deduction
One of the most notable new provisions is the car loan interest deduction 2025–2029. For tax years beginning after 2024 and before 2029, taxpayers may deduct qualified passenger vehicle loan interest, subject to strict rules.
What Counts as Qualified Passenger Vehicle Loan Interest?
Qualified passenger vehicle loan interest applies when:
- The loan was incurred after December 31, 2024.
- The vehicle is new, secured by a first lien, and for personal use.
- The vehicle was assembled in the United States.
Excluded loans include:
- Fleet sales
- Commercial vehicle loans
- Leases
- Salvage title purchases
- Scrap or parts vehicles
To claim the deduction, taxpayers must list the vehicle identification number (VIN) on their return.
Deduction Limits
- The deduction is capped at $10,000 per year.
- A MAGI limit applies: the allowable deduction is reduced by $200 for every $1,000 over $100,000 MAGI ($200,000 for joint filers).
- Importantly, taxpayers who do not itemize can still claim this deduction.
What These OBBBA Personal Interest Deductions Mean for You
The OBBBA tax changes will have long-lasting effects:
- Homeowners: Expect permanent limits on the mortgage interest deduction, but relief through deductible mortgage insurance premiums.
- Car buyers: A new temporary deduction for car loan interest offers tax savings—if you purchase a qualifying new, U.S.-assembled passenger vehicle between 2025 and 2029.
Key Takeaway
The OBBBA personal interest deductions reshape how taxpayers approach both home financing and vehicle purchases. Homeowners face permanent mortgage deduction limits, while car buyers gain a new but temporary tax break. Planning purchases and financing strategies with these rules in mind can maximize tax benefits. Contact us with any questions you have about personal interest deductions or check out our chart with the key provisions from OBBBA here.