The OBBBA introduces two completely new programs that could benefit your family – one for vehicle purchases and another for newborns.
Deduct Interest on Your New Car Loan
If you’re thinking about buying a new vehicle, there’s a new tax break that might sweeten the deal.
What qualifies:
- The vehicle must be brand new (not used) and purchased after January 1, 2025
- Must be assembled in the United States
- For personal use only – no business use
- You’ll need to provide the VIN on your tax return
The tax benefit:
- Deduct up to $10,000 of loan interest per year
- This is an “above-the-line” deduction, reducing your adjusted gross income
- The loan must be the first (and only) lien on the vehicle
Income limits apply:
- Single filers: phases out between $100,000-$150,000 AGI
- Married filing jointly: phases out between $200,000-$250,000 AGI
Trump Accounts for Newborns
Here’s something completely new: special savings accounts for babies born after December 31, 2024.
The government kicks things off:
- Automatic $1,000 deposit for eligible newborns
- Both parents and child must have Social Security numbers
- Must be U.S. citizens
How contributions work:
- Starting July 4, 2026, you can contribute up to $5,000 annually
- No tax deduction for your contributions
- Your employer can contribute up to $2,500 per year as a tax-free benefit
- No contributions allowed after the child turns 18
Investment rules:
- Money grows tax-free while it’s in the account
- Limited to low-cost mutual funds or ETFs (annual fees under 0.1%)
- Absolutely no access until the child turns 18
Getting money out:
- Essentially treated like a traditional IRA
- Subject to 10% penalty if under age 59 ½
- No withdrawal requirement until age 75
- Withdrawals may be taxable or non-taxable depending on contribution type- most are taxable except for individual/family contributions
- Qualified withdrawals not subject to 10% penalty
- Qualified expenses include post-secondary education, certain post-secondary credentialing programs, certain small business expenditures, first time home purchase for beneficiary
- Does not impact financial aid
- More guidance needed on these accounts
Planning Considerations
The auto interest deduction is temporary through 2028, so if you’re considering a vehicle purchase, the next few years might be optimal timing – especially if you can find a qualifying U.S.-assembled vehicle.
The newborn accounts offer a unique opportunity, though the money is locked up for 18 years. The government’s $1,000 contribution plus tax-free growth make these attractive despite the restrictions. If your employer offers contributions, definitely coordinate with HR – it’s essentially free money for your child’s future.
