September 23, 2025 • 22 mins
In Episode 154 of the Teaching Tax Flow podcast, hosts Chris Picciurro, CPA, and John Tripolsky rev up a discussion on one of the most surprising new provisions from the One Big Beautiful Bill Act (OB3): a personal tax deduction for qualified automobile loan interest.
Chris and John break down how this above-the-line deduction works, the criteria for qualifying, and the potential pitfalls for taxpayers. From vehicle requirements to phased-out income thresholds, they explain how this law is designed to incentivize specific behaviors and how taxpayers can maximize the benefit.
The episode also includes case studies and examples showing how taxpayers in different income brackets may be affected, emphasizing the importance of marginal tax rate planning to understand the real financial impact.
What You’ll Learn:
• The specifics of the new automobile loan interest deduction under OB3
• Requirements for eligibility (new vehicle, U.S.-assembled, secured loan)
• How phase-outs at $100K (single) and $200K (married filing jointly) affect deductions
• Practical examples of how different taxpayers qualify—or don’t
• Why your marginal tax rate (MTR) is a critical metric for evaluating tax strategies
Key Insights:
This new provision could provide meaningful savings for qualifying taxpayers, but the rules are nuanced. Proper planning ensures you avoid phase-out surprises and maximize deductions where possible.
Notable Quotes:
• “Tax laws are written to encourage and discourage certain behaviors.” – Chris Picciurro
• “Now there’s a deduction on a personal tax return for qualified automobile loan interest.” – Chris Picciurro
• “For every thousand you’re over, you lose a deduction of $200.” – Chris Picciurro
• “Your number one KPI in tax planning is your marginal tax rate, not your tax bracket.” – Chris Picciurro
• “If you’re over $100,000 in income, you start getting phased out of this deduction.” – Chris Picciurro
Resources:
• Episode Sponsor: Wealth Builders Mortgage Group
• Teaching Tax Flow YouTube Channel
- (00:00) - Summary
- (00:00) - Exploring New Automobile Interest Deductions with Teaching Tax Flow
- (02:20) - New Tax Deduction for Qualified Automobile Loan Interest
- (09:29) - Understanding Tax Phase Outs and Their Impact on Deductions
- (15:41) - Understanding Vehicle Loan Interest Deductions and Tax Implications
- (21:12) - Exploring Tax Topics and Investment Advice on Teaching Taxable
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
John Tripolsky (00:03):
Hey everybody, and welcome back to the Teaching
Tax Full podcast episode 154today. We are revving up for a
very interesting topic. You'llsee what I'm talking about here
in a moment as we look at thenew automobile interest
deductions. So before we dothat, as always, let's take a
brief moment and thank ourepisode sponsor.
Ad Read (00:23):
This episode is sponsored by Wealth Builders
Mortgage Group, powered byMovement Mortgage, one of the
top mortgage teams in the nationand a powerhouse in the real
estate investing world. Withover $1,100,000,000 in closed
mortgage volume and more than3,000 investor deals under their
belt, they don't just talk thetalk, they walk it. Their team
(00:44):
specializes in helping shortterm and long term rental
investors scale smart withcustomized lending strategies.
They offer all STR loanproducts, including second home,
investment, non QM, bankstatement, asset based, and
HELOCs. They also offer allprimary home loan products too.
Whether you're just starting outor expanding an existing
(01:04):
portfolio, their unique Path of10 strategy is designed to help
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and start building your roadmaptoday.
John Tripolsky (01:22):
Hey, everybody. Hopefully, my corny little intro
there did not turn you off aboutrevving up for this wonderful
topic. So, obviously, you heardit. What we're gonna talk about
here. Being a car guy, Iabsolutely love this.
I'd love to see how this isactually gonna tie in to
everything that we're talkingabout here at teaching tax one,
especially on the podcast. Butthe good thing about this one is
I didn't have to bring a guest.I brought my cohost, Chris
(01:45):
Pacquero. How's it going,brother? Let's talk about this.
Chris Picciurro, CPA (01:47):
It's going great. I know we're both from
the Motor City. Now you're moreof a car guy than I am. I'm so,
so I'm I'm really excited thatyou're excited about this, and
it's something, you know, a lotof times when tax laws are
getting bandied about in the taxprofessional world, we could see
things coming. But, gosh, thisone, I didn't see coming.
(02:09):
You know, not that it came outof nowhere. It was just, wow.
Okay. And this tax law changewas part of our friend o b three
or the one big beautiful billact. And what, we always say
that tax laws are written toencourage and discourage certain
behavior.
So automobile auto ah,automobile loan interest
(02:31):
deduction. So shocking Icouldn't get it out of my mouth.
There's now a deduction on apersonal tax return for
qualified automobile loaninterest. And, obviously, this
is to to the benefit indirectlyof automobile manufacturers.
(02:53):
And, and when we dive into whatthe qualifications are, I think
you could read you could readthrough this bill and understand
one of the laws of teaching taxflow, like I just said.
The tax agencies are yourinvoluntary business partner. So
laws are gonna encourage anddiscourage certain social
economic, behavior, and this isone of them. So part of that one
(03:15):
big beautiful bill act, youmight be able to take an
interest deduction for anautomobile that you've purchased
on your tax return. And here'sthe interesting thing, John.
It's not even an itemizeddeduction.
Remember, itemized deductionsare reported on schedule a, and
you have to have all of youritemized deductions exceed the
(03:36):
standard deduction for them toreally matter. This is what we
call an above the linededuction, meaning, it is coming
off of your tax bill before youradjusted gross income is is is
fully calculated.
John Tripolsky (03:50):
So And this and, honestly, this news, I think, is
gonna impact a lot of people. Ithink the awareness of it is
probably gonna be the biggestchallenge. Right? Like, a lot of
people don't know that. And, Imean, if you think about it too.
Right? Like and, again, thiscome from somebody who's a car
guy. You know, I I think Itrigger every single auto
automotive related Facebook adon the planet. Right? I kinda
feel like the the low interestrates on vehicles have kinda
(04:14):
taken a little bit of a die.
You know, you don't see them asmuch. I know they're still
there. But, I mean, just justthink about that offset. Right?
I mean and I would love to diveinto this just a little bit.
I know there's some good examplecase studies maybe we can go
through in defining this alittle bit, but I'm glad that
you did mention that regardingthe difference, you know, the
above and below the line toobecause that's a huge thing. And
(04:35):
we talked about that, you know,just last week.
Chris Picciurro, CPA (04:37):
Yes. Above and below the line, and you want
definitely wanna be above theline. So that reduces your AGI.
So let's talk about thededuction itself. The limit is
gonna be $10,000 of qualifiedauto loan interest deduction per
year.
Now it has to be linked to aqualified vehicle. So what does
(04:58):
that mean? It has to be a newvehicle, meaning it's the first
use begins with the taxpayer. Ithas to be a vehicle that was
final assembly within The UnitedStates. The gross vehicle weight
rating has to be under 14,000pounds, so we're not talking
about most vehicles are under14,000 pounds, so we're not
(05:21):
talking about these bigvehicles.
It has to be personal use only,so it cannot be a business
vehicle. Now there are sothere's no, like, double
dipping, John. Like, if you buya purse a business vehicle and
you take advantage of bonusdepreciation or section one
seventy nine, this is different.This is for individuals. So this
is for people.
We talk all the time that thereare ton of deductions for
(05:44):
business owners and rentalproperty owners, but for people
that are primarily employees orreceive a w two, there are a ton
of deductions. This is this isone of them. And it has to be
secured by an auto loan, not alease. So leased vehicles are
not, eligible for thisdeduction. So which vehicles are
not eligible?
(06:05):
Used vehicles, leased vehicles,business use vehicles, fleet
vehicles, and then any vehicleassembly assembled. A seven
called outside
John Tripolsky (06:16):
what you meant.
Chris Picciurro, CPA (06:17):
Of The US Of A.
John Tripolsky (06:19):
And a lot of that makes sense. I mean and I'm
glad you mentioned that too. Youknow? That kind of alleviates
the the double dippingopportunity. You know?
It's not like you're you know,I'm I'm just you know what? I'm
gonna leave every analogy andcome up with out of it because
it's just gonna come out bad.I'm gonna roll this week,
though. I think I'm on somereally good, bad dad jokes, but
I'll leave them out. And it'sinteresting that they put 14,000
(06:40):
pounds in there for a personalvehicle.
Chris Picciurro, CPA (06:42):
Mhmm.
John Tripolsky (06:43):
That gross vehicle weight because I mean, I
got some friends that drivepretty large vehicles, and we're
nowhere near 14,000 pounds. So Iwould love to see what guys
drive around a 13,000 poundgross vehicle vehicle for
personal use would beinteresting. So I wonder if,
like so what if somebody has avehicle? This is a dumb
(07:03):
question. You might just tell meto shut up and leave it the
leave in the can.
Mhmm. Would it make sense? Or doyou think some people are they
might start selling you know,say they're in a their business.
Would they sell themselves theirvehicle? Could that in a sense
be a double like, I mean, like,think about, like, if you're a c
I don't know.
C corp or something like that.Okay.
Chris Picciurro, CPA (07:25):
No. I mean, because remember
John Tripolsky (07:26):
dumb ones out there.
Chris Picciurro, CPA (07:27):
Yeah. That was pretty dumb, but we
appreciate I don't think I'veever said your question was
dumb. I'm usually kinder. But Iappreciate that. Wait.
No. That's an because remember,it's gotta be a but, actually,
it's not a terrible it's not aterrible question because that's
my piece. People are alwayslooking for creative ways to to
to do things.
John Tripolsky (07:44):
And that's what I'm thinking about. Like, can
you skirt around this?
Chris Picciurro, CPA (07:47):
But That doesn't that no. Because
remember, it to be a newvehicle.
John Tripolsky (07:52):
Oh, that's right.
Chris Picciurro, CPA (07:53):
Or can't be a used vehicle.
John Tripolsky (07:55):
You're right. Okay. Yes. That's basically This
is coming from a direct from themanufacturer's floor plan. Well,
it's not really themanufacturer's floor plan, but
that's a whole other thing.
You're buying a new vehicleassembled in The States, final
assembly in The States, andsecured by law. Makes sense.
Chris Picciurro, CPA (08:13):
Right. Right. Okay. Now what are the
loan requirements? The loanrequirement must be a secured
loan issued after 12/31/2024.
So we're talking about twothousand twenty twenty five
vehicles And you are right.Almost every vehicle is under
(08:33):
14,000 pounds gross vehicleweight rating. You know, most
personal use vehicles. But theyhad to put something in there.
Right?
Maybe someone's trying to drivea a tank around as a as a
John Tripolsky (08:44):
as a person. By that, and, I mean, I don't think
we know the answer to thisunless we've really read into
it. Right? So we're just gonnasay it, we probably don't have a
response. But, you know, Iimagine by them stating that it
needs to be a secured loan tothat vehicle, I'm sure it has to
be a vehicle loan.
It's not like you can oh, I Igot a HELOC, and I'm gonna go
buy a vehicle with it, and I'mgonna write off that interest
(09:07):
rate. That's probably they'reprobably trying to avoid that.
But, again, I we'd have to lookinto it. I'm sure Correct.
Chris Picciurro, CPA (09:13):
Now if you have a HELOC and you have you
can use it for home equityimprovements and stuff, yeah,
then it's deductible.
John Tripolsky (09:20):
But Right.
Chris Picciurro, CPA (09:21):
But not
John Tripolsky (09:21):
to go buy a not to go buy a Ferrari without
telling your wife you're buyinga Ferrari and promising you're
you're gonna build the additionon the house.
Chris Picciurro, CPA (09:29):
Well, right. And then so here it's Now
that's a good segue becausethere are phase out thresholds.
So I'll take it. Your deductionso this deduction is eligible,
but it phases out. Meaning, ifyou go over a certain income
threshold, you start to lose thefull deduction.
Those phase outs start formarried filing joint at
$200,000. So not I would imaginenot too many people are buying
(09:53):
Ferraris if they don't make atleast $200,000 a year. And if
they do, they're gonna be in thesecond category of single phase
out of a $100,000 pretty damnsoon.
John Tripolsky (10:04):
Oh, I see. Third category of just being a
financial idiot. But
Chris Picciurro, CPA (10:08):
But yeah. So single and head of household,
if you have over a $100,000 ofof adjusted gross income or
modified adjusted gross income,then you don't lose the
deduction, but it begins tophase out. $200,000 for married
filing jointly. So that's kindof the trick tricky part of, you
know, are you gonna even beeligible for this based on
income? Now phase outs can bevery, very confusing.
(10:30):
So one of the things that wewe've really taken a lot of
feedback, positive feedbackwithin our defeating taxes
private Facebook group.Shameless plug. Just go to
defeatingtaxes.com to join.Thanks. Use more examples.
So we actually have a few casestudies, for for that we're
gonna talk about on this podcastepisode. Now what's the phase
(10:51):
out formula? The deduction,remember, it maxes at $10,000,
is reduced by $200 for everythousand dollars over the
threshold. So if you're atanything over 200,000 married
joint, every thousand year over,you lose a deduction of $200.
Now this is why it's soimportant.
Remember, your number one KPI,key performance indicator in tax
(11:15):
planning and strategy is yourmarginal tax rate, not your tax
bracket. Because your taxbracket's not gonna calculate
these type of phase outsproperly. But a marginal tax
rate will. We're gonna runthrough three we're gonna run
through three, three casestudies, Johnny team.
John Tripolsky (11:31):
And here's here's a question for you, semi
related to this too. So, youknow, I feel like we've been
mentioning and bringing up theterm phase out a lot more in the
past six, eight months than wedid previously. Has do you do
you find that you know, I mean,you've been practicing for a
couple decades now, and thensome It's like a long time when
you say it that way. Hey. Ididn't I didn't say you've been
(11:52):
practicing forever.
I just said for a long It justmakes
Chris Picciurro, CPA (11:55):
you a little over a score. A little
over a score? Years?
John Tripolsky (11:59):
I believe so. Four score and seven year. Yeah.
K. Is are phase outs relativelynew in the, the tax dictionary,
we should say?
I mean, is there all have theyalways been so prevalent, say,
ten, fifteen years ago, or is itkind of a newer thing?
Chris Picciurro, CPA (12:16):
I mean, I think there's more awareness of
phase outs. I feel like thereare more of them. I mean, what's
interesting is remember, tax taxlaws are written in encouraging
discursion behavior. What dophase outs tell us? Phase outs
tell us what the federalgovernment feels is a high
amount of income.
Because if you're over a$100,000 and you're single or
(12:38):
head of household, basically,they're saying, you don't get
this full deduction. We feellike you don't need it. Doesn't
mean you don't deserve it, butyou don't need it at your income
level.
John Tripolsky (12:47):
And I always think about this too. If anybody
else is listening, this kindafeels the same way you know, in
in my mind, the crazy world ofeverything that's going on up
there. You know, I I picture,quote, unquote, filing, air
quotes, filing taxes back, youknow, the fifties, forties, long
time ago, before we were around.I I in my mind, I almost see
(13:09):
that as, like, Pleasantville.Right?
Like, oh, form? Check. Check.Check. Mhmm.
Attach something. Staple it.Send it off. Right? Like, now
there's so many things.
Like, we mentioned phase outsand all the stuff, different
stuff. It's like tax planning,which we always talk about, is
really that's like the beacon ofeverything. Like, if you ever
wanna have control and, youknow, sticking it to the, you
(13:32):
know, whatever, you come up withyour own term, out there with
having to shell out so much,like, get into it. And we got
tons of content on that. So ifanybody's interested in that,
check that out.
Just Google tax planning,teaching tax while you find a
million things.
Chris Picciurro, CPA (13:47):
And the thing to consider about phase
outs is these are federal phaseouts. States have different
conformity. Again, not to keepplugging defeating taxes, but we
have a lot of some we've beentalking about that in in our
private Facebook group a littlebit. However, the phase out
think about a $100,000 for asingle or head of household
person. They start gettingphased out of this deduction.
(14:07):
Okay? Deduction could besignificant. Now if you make a
$100,000, should you be paying$20,000 a year of automobile
interest? Probably not, but youdon't you never know. That's
modified adjusted gross income.
What if you make 200,000, butit's all rental income and you
get a bunch of depreciationdeduction? Here's another
thought, John. A $100,000 inrural Mississippi of income or a
(14:33):
small town goes a lot or collegetown, let's say, goes a lot
farther than Silicon Valley.Right? So it it's someone could
be barely making it in one placeand living in a completely
different lifestyle than theother.
So, just a thought.
John Tripolsky (14:53):
We should do a whole other episode on tax
planning and residency planningand have it sponsored by real
estate agency. That'snationwide. We'll move
everybody.
Chris Picciurro, CPA (15:01):
We're working on that.
John Tripolsky (15:01):
We'll move everybody from California over
to the East.
Chris Picciurro, CPA (15:05):
That sounds like a good plan.
John Tripolsky (15:06):
I digress.
Chris Picciurro, CPA (15:07):
So let's look at we're gonna do three
case studies. Let's first talkabout Emma. She's single,
seemingly looking to mingle.She's got a good job. She got
makes $90,000 of income.
Her modified adjusted grossincome is 90,000. She bought a
new vehicle. It's a qualifiedvehicle, so it's it's it was
assembled in The US, and it thefinal assembly was in The US. So
(15:32):
could a vehicle maybe not befirst they go doesn't mean every
part has to be from The US.Final assemblies in The US,
personal use, new vehicle.
She had $2,800 worth of vehicleinterest. Now interesting
thought. Are these companies nowloan come these these lending
(15:52):
lenders, are they going toreport this? So we're gonna keep
our eyes out there for new taxforms. Or is this gonna be
because the IRS doesn't wanteveryone to just claim those
interest deduction without itgetting reported to them.
Like, mortgage interest isreported, you know, to the IRS.
Yeah. So, anyway point. Sodeduction at $2,800. She's under
(16:14):
the $100,000 limit.
The $2,800 the $100 of interestpaid is under the $10,000
maximum deduction. Emma is happywith her new vehicle. She's hot
to trot on the town as sheenters the dating scene, and she
drives around in confidenceknowing that she got a 2,800
deduction.
John Tripolsky (16:34):
As long as her tax professional knows about
this.
Chris Picciurro, CPA (16:36):
So Exactly. Yes. Now we've got
Marcus. Marcus is a head ofhousehold. So head of household
means he's he's single.
However, he does have qualifieddependent. He's modified
adjusted gross income's 95,000,and he paid $93,500 worth of
interest. So let's think aboutthis. Head of household. Okay?
(16:59):
Magi? What's oh, acronym. John,you've killing it on those
that's thank you. Yes. You'vebeen killing it on the on that.
But the Magi is our acronym fortax you know, in the tax world.
But, but he'll get the under a100,000, interest paid, 3,500
fully deductible. Marcus ishappy. Final case study, Olivia.
(17:23):
Olivia is also single.
Olivia is doing well forherself. She's making a
$140,000, but Olivia wants oneof those nice whips. So she has
$10,800 worth of mortgageinterest paid. Oh, she did buy
US made luxury vehicle, so theso the vehicle actually
qualifies. But let's talk abouttwo things with Olivia.
(17:47):
First of all, hey, girl. She'ssingle, making a $140. I don't
know about allocating that manyresources to a vehicle, but we
ain't her financial adviser. Wewe we encourage Olivia to jump
into the defeating taxes privateFacebook group, though. Anyway,
her modified adjusted grossincome is $1.40, so she's over
that $100,000 threshold.
(18:07):
And the interest is $10,800,which is over the $10,000 limit.
So we've got a couple thingsgoing on. Let's first talk about
the the maximum deduction. Themaximum deduction is gonna be
$10,000. So the fact that shepaid 10,800 is 8 that 800 the
additional 800 is not gonna bedeductible at all.
Her MAGI is $1.40. It's $40,000over the threshold. Remember, we
(18:32):
said for every thousand, youlose $200 of deduction. So she's
40 over. 40 times $200 is an$800,000 phase out.
I know that's tricky. So hermaximum deduction would be the
$10,000 of mortgage interestpaid or mortgage interest, car
loan interest paid. Remember,she was at ten eight, but she
(18:54):
only gets credit for 10 minusthe phase out of $2,000. So if
she's in a 32% marginal taxrate, she saves $640. However,
Marcus, if he's in a 22%marginal tax rate, he actually
saves $770.
So Marcus saves more money thanOlivia but pays a third less
(19:16):
loan interest because of hisincome. Isn't that interesting?
John Tripolsky (19:20):
No problem. Do have to go back. You know, I
made the Ferrari reference sincethey're made in Italy. Does not
qualify. It would not qualifyfor this at all.
And on I did just look this up,and I believe I believe it's on
moneygeek. I don't wanna quotemoneygeek.com. I don't wanna
quote it a 100% because I don'tknow where my quick Google
search is actually pulling thisfrom. But just so everybody
knows, if you're if you haven'tbeen in the the auto new auto
(19:41):
market here in a while, and thisis not this is just in general,
not for US manufacturer, butthey're about 50,000. Comes up
49,000 and some changes, theaverage new vehicle price.
So, you know, even at a lowinterest rate, that's
significant savings if somebodyqualifies and checks all those
boxes. Right?
Chris Picciurro, CPA (19:59):
That's nailed it. So, here's the thing,
cash flow versus tax flow. Noteveryone, everyone's situation
is unique. What we hear, what wesee is saying, dollars $10.00 a
mortgage of, I keep sayingmortgage interest because I'm
just so used to that, right?Automobile interest, yes, that's
the maximum but be cognizant offiling status, modified adjusted
(20:22):
gross income, and how much youpaid and then that calculates
your tax savings.
John Tripolsky (20:27):
I love it. I love it. And this was a good
one. Again, that we dove into. Iknow there's a lot of interest
on some of the reels that we'veput out there on YouTube.
So everybody check those out.There's a lot of them. 600 plus
videos now. Just bragging onourselves. And I'm hardly in any
of them.
So it's good. It's mostly thishandsome gentleman that's in it.
And to kinda give you a littlebit of a preview too before we
let you go, I'm looking on ourlist of our roster of other
(20:48):
topics we're gonna talk about,Chris, and and in no order,
really, because our schedule onthese changes. But looking, you
know, over the next month, monthand a half, we're getting some
pretty good stuff, man. So we'relooking back, and not looking
back, technically, at the IRSdata book that they put out
every year.
We're gonna dive deep into somenumbers, some follow the facts
that they usually put out. We'regetting into material
participation, what that meanswith somebody good for the real
(21:11):
estate investors out there.We're also gonna get into the
one fun one I know that I canraise Chris's blood pressure on
somehow or another. I will findthat way again. We're gonna talk
about LLCs.
We're gonna talk about Good job.Forming them.
Chris Picciurro, CPA (21:25):
I look forward to it, and, I wanna
thank everyone for joining us.
John Tripolsky (21:30):
Absolutely. Absolutely. Again, everybody
check out definitaxes.com.That's a private Facebook group.
Chris had mentioned there acouple times and also the
YouTube channel.
Check that out. Subscribe. Don'tbe lazy. And we'll see everybody
back here again next week on theteaching tax flow podcast. Same
place, different time, differentday of the week, different date.
Same day of week, differentdate. Completely different topic
(21:50):
here on the show. Tried to do itthere, and I messed it up as bad
as Chris saying. Assembly,assemble, and all that stuff.
You get jumbled.
Have a good one.
Disclaimer (22:01):
The content provided is educational purposes only. We
encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
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The content of this podcast doesnot constitute an offer of
(22:22):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained in the memorandum.
Hey everybody, and welcome back to the Teaching
Tax Full podcast episode 154today. We are revving up for a
very interesting topic. You'llsee what I'm talking about here
in a moment as we look at thenew automobile interest
deductions. So before we dothat, as always, let's take a
brief moment and thank ourepisode sponsor.
Ad Read (00:23):
This episode is sponsored by Wealth Builders
Mortgage Group, powered byMovement Mortgage, one of the
top mortgage teams in the nationand a powerhouse in the real
estate investing world. Withover $1,100,000,000 in closed
mortgage volume and more than3,000 investor deals under their
belt, they don't just talk thetalk, they walk it. Their team
(00:44):
specializes in helping shortterm and long term rental
investors scale smart withcustomized lending strategies.
They offer all STR loanproducts, including second home,
investment, non QM, bankstatement, asset based, and
HELOCs. They also offer allprimary home loan products too.
Whether you're just starting outor expanding an existing
(01:04):
portfolio, their unique Path of10 strategy is designed to help
you move from a nine to five jobto financial independence. If
you're looking for a lendingpartner who truly understands
the investor mindset, visitwealthbuildersmortgagegroup.com
and start building your roadmaptoday.
John Tripolsky (01:22):
Hey, everybody. Hopefully, my corny little intro
there did not turn you off aboutrevving up for this wonderful
topic. So, obviously, you heardit. What we're gonna talk about
here. Being a car guy, Iabsolutely love this.
I'd love to see how this isactually gonna tie in to
everything that we're talkingabout here at teaching tax one,
especially on the podcast. Butthe good thing about this one is
I didn't have to bring a guest.I brought my cohost, Chris
(01:45):
Pacquero. How's it going,brother? Let's talk about this.
Chris Picciurro, CPA (01:47):
It's going great. I know we're both from
the Motor City. Now you're moreof a car guy than I am. I'm so,
so I'm I'm really excited thatyou're excited about this, and
it's something, you know, a lotof times when tax laws are
getting bandied about in the taxprofessional world, we could see
things coming. But, gosh, thisone, I didn't see coming.
(02:09):
You know, not that it came outof nowhere. It was just, wow.
Okay. And this tax law changewas part of our friend o b three
or the one big beautiful billact. And what, we always say
that tax laws are written toencourage and discourage certain
behavior.
So automobile auto ah,automobile loan interest
(02:31):
deduction. So shocking Icouldn't get it out of my mouth.
There's now a deduction on apersonal tax return for
qualified automobile loaninterest. And, obviously, this
is to to the benefit indirectlyof automobile manufacturers.
(02:53):
And, and when we dive into whatthe qualifications are, I think
you could read you could readthrough this bill and understand
one of the laws of teaching taxflow, like I just said.
The tax agencies are yourinvoluntary business partner. So
laws are gonna encourage anddiscourage certain social
economic, behavior, and this isone of them. So part of that one
(03:15):
big beautiful bill act, youmight be able to take an
interest deduction for anautomobile that you've purchased
on your tax return. And here'sthe interesting thing, John.
It's not even an itemizeddeduction.
Remember, itemized deductionsare reported on schedule a, and
you have to have all of youritemized deductions exceed the
(03:36):
standard deduction for them toreally matter. This is what we
call an above the linededuction, meaning, it is coming
off of your tax bill before youradjusted gross income is is is
fully calculated.
John Tripolsky (03:50):
So And this and, honestly, this news, I think, is
gonna impact a lot of people. Ithink the awareness of it is
probably gonna be the biggestchallenge. Right? Like, a lot of
people don't know that. And, Imean, if you think about it too.
Right? Like and, again, thiscome from somebody who's a car
guy. You know, I I think Itrigger every single auto
automotive related Facebook adon the planet. Right? I kinda
feel like the the low interestrates on vehicles have kinda
(04:14):
taken a little bit of a die.
You know, you don't see them asmuch. I know they're still
there. But, I mean, just justthink about that offset. Right?
I mean and I would love to diveinto this just a little bit.
I know there's some good examplecase studies maybe we can go
through in defining this alittle bit, but I'm glad that
you did mention that regardingthe difference, you know, the
above and below the line toobecause that's a huge thing. And
(04:35):
we talked about that, you know,just last week.
Chris Picciurro, CPA (04:37):
Yes. Above and below the line, and you want
definitely wanna be above theline. So that reduces your AGI.
So let's talk about thededuction itself. The limit is
gonna be $10,000 of qualifiedauto loan interest deduction per
year.
Now it has to be linked to aqualified vehicle. So what does
(04:58):
that mean? It has to be a newvehicle, meaning it's the first
use begins with the taxpayer. Ithas to be a vehicle that was
final assembly within The UnitedStates. The gross vehicle weight
rating has to be under 14,000pounds, so we're not talking
about most vehicles are under14,000 pounds, so we're not
(05:21):
talking about these bigvehicles.
It has to be personal use only,so it cannot be a business
vehicle. Now there are sothere's no, like, double
dipping, John. Like, if you buya purse a business vehicle and
you take advantage of bonusdepreciation or section one
seventy nine, this is different.This is for individuals. So this
is for people.
We talk all the time that thereare ton of deductions for
(05:44):
business owners and rentalproperty owners, but for people
that are primarily employees orreceive a w two, there are a ton
of deductions. This is this isone of them. And it has to be
secured by an auto loan, not alease. So leased vehicles are
not, eligible for thisdeduction. So which vehicles are
not eligible?
(06:05):
Used vehicles, leased vehicles,business use vehicles, fleet
vehicles, and then any vehicleassembly assembled. A seven
called outside
John Tripolsky (06:16):
what you meant.
Chris Picciurro, CPA (06:17):
Of The US Of A.
John Tripolsky (06:19):
And a lot of that makes sense. I mean and I'm
glad you mentioned that too. Youknow? That kind of alleviates
the the double dippingopportunity. You know?
It's not like you're you know,I'm I'm just you know what? I'm
gonna leave every analogy andcome up with out of it because
it's just gonna come out bad.I'm gonna roll this week,
though. I think I'm on somereally good, bad dad jokes, but
I'll leave them out. And it'sinteresting that they put 14,000
(06:40):
pounds in there for a personalvehicle.
Chris Picciurro, CPA (06:42):
Mhmm.
John Tripolsky (06:43):
That gross vehicle weight because I mean, I
got some friends that drivepretty large vehicles, and we're
nowhere near 14,000 pounds. So Iwould love to see what guys
drive around a 13,000 poundgross vehicle vehicle for
personal use would beinteresting. So I wonder if,
like so what if somebody has avehicle? This is a dumb
(07:03):
question. You might just tell meto shut up and leave it the
leave in the can.
Mhmm. Would it make sense? Or doyou think some people are they
might start selling you know,say they're in a their business.
Would they sell themselves theirvehicle? Could that in a sense
be a double like, I mean, like,think about, like, if you're a c
I don't know.
C corp or something like that.Okay.
Chris Picciurro, CPA (07:25):
No. I mean, because remember
John Tripolsky (07:26):
dumb ones out there.
Chris Picciurro, CPA (07:27):
Yeah. That was pretty dumb, but we
appreciate I don't think I'veever said your question was
dumb. I'm usually kinder. But Iappreciate that. Wait.
No. That's an because remember,it's gotta be a but, actually,
it's not a terrible it's not aterrible question because that's
my piece. People are alwayslooking for creative ways to to
to do things.
John Tripolsky (07:44):
And that's what I'm thinking about. Like, can
you skirt around this?
Chris Picciurro, CPA (07:47):
But That doesn't that no. Because
remember, it to be a newvehicle.
John Tripolsky (07:52):
Oh, that's right.
Chris Picciurro, CPA (07:53):
Or can't be a used vehicle.
John Tripolsky (07:55):
You're right. Okay. Yes. That's basically This
is coming from a direct from themanufacturer's floor plan. Well,
it's not really themanufacturer's floor plan, but
that's a whole other thing.
You're buying a new vehicleassembled in The States, final
assembly in The States, andsecured by law. Makes sense.
Chris Picciurro, CPA (08:13):
Right. Right. Okay. Now what are the
loan requirements? The loanrequirement must be a secured
loan issued after 12/31/2024.
So we're talking about twothousand twenty twenty five
vehicles And you are right.Almost every vehicle is under
(08:33):
14,000 pounds gross vehicleweight rating. You know, most
personal use vehicles. But theyhad to put something in there.
Right?
Maybe someone's trying to drivea a tank around as a as a
John Tripolsky (08:44):
as a person. By that, and, I mean, I don't think
we know the answer to thisunless we've really read into
it. Right? So we're just gonnasay it, we probably don't have a
response. But, you know, Iimagine by them stating that it
needs to be a secured loan tothat vehicle, I'm sure it has to
be a vehicle loan.
It's not like you can oh, I Igot a HELOC, and I'm gonna go
buy a vehicle with it, and I'mgonna write off that interest
(09:07):
rate. That's probably they'reprobably trying to avoid that.
But, again, I we'd have to lookinto it. I'm sure Correct.
Chris Picciurro, CPA (09:13):
Now if you have a HELOC and you have you
can use it for home equityimprovements and stuff, yeah,
then it's deductible.
John Tripolsky (09:20):
But Right.
Chris Picciurro, CPA (09:21):
But not
John Tripolsky (09:21):
to go buy a not to go buy a Ferrari without
telling your wife you're buyinga Ferrari and promising you're
you're gonna build the additionon the house.
Chris Picciurro, CPA (09:29):
Well, right. And then so here it's Now
that's a good segue becausethere are phase out thresholds.
So I'll take it. Your deductionso this deduction is eligible,
but it phases out. Meaning, ifyou go over a certain income
threshold, you start to lose thefull deduction.
Those phase outs start formarried filing joint at
$200,000. So not I would imaginenot too many people are buying
(09:53):
Ferraris if they don't make atleast $200,000 a year. And if
they do, they're gonna be in thesecond category of single phase
out of a $100,000 pretty damnsoon.
John Tripolsky (10:04):
Oh, I see. Third category of just being a
financial idiot. But
Chris Picciurro, CPA (10:08):
But yeah. So single and head of household,
if you have over a $100,000 ofof adjusted gross income or
modified adjusted gross income,then you don't lose the
deduction, but it begins tophase out. $200,000 for married
filing jointly. So that's kindof the trick tricky part of, you
know, are you gonna even beeligible for this based on
income? Now phase outs can bevery, very confusing.
(10:30):
So one of the things that wewe've really taken a lot of
feedback, positive feedbackwithin our defeating taxes
private Facebook group.Shameless plug. Just go to
defeatingtaxes.com to join.Thanks. Use more examples.
So we actually have a few casestudies, for for that we're
gonna talk about on this podcastepisode. Now what's the phase
(10:51):
out formula? The deduction,remember, it maxes at $10,000,
is reduced by $200 for everythousand dollars over the
threshold. So if you're atanything over 200,000 married
joint, every thousand year over,you lose a deduction of $200.
Now this is why it's soimportant.
Remember, your number one KPI,key performance indicator in tax
(11:15):
planning and strategy is yourmarginal tax rate, not your tax
bracket. Because your taxbracket's not gonna calculate
these type of phase outsproperly. But a marginal tax
rate will. We're gonna runthrough three we're gonna run
through three, three casestudies, Johnny team.
John Tripolsky (11:31):
And here's here's a question for you, semi
related to this too. So, youknow, I feel like we've been
mentioning and bringing up theterm phase out a lot more in the
past six, eight months than wedid previously. Has do you do
you find that you know, I mean,you've been practicing for a
couple decades now, and thensome It's like a long time when
you say it that way. Hey. Ididn't I didn't say you've been
(11:52):
practicing forever.
I just said for a long It justmakes
Chris Picciurro, CPA (11:55):
you a little over a score. A little
over a score? Years?
John Tripolsky (11:59):
I believe so. Four score and seven year. Yeah.
K. Is are phase outs relativelynew in the, the tax dictionary,
we should say?
I mean, is there all have theyalways been so prevalent, say,
ten, fifteen years ago, or is itkind of a newer thing?
Chris Picciurro, CPA (12:16):
I mean, I think there's more awareness of
phase outs. I feel like thereare more of them. I mean, what's
interesting is remember, tax taxlaws are written in encouraging
discursion behavior. What dophase outs tell us? Phase outs
tell us what the federalgovernment feels is a high
amount of income.
Because if you're over a$100,000 and you're single or
(12:38):
head of household, basically,they're saying, you don't get
this full deduction. We feellike you don't need it. Doesn't
mean you don't deserve it, butyou don't need it at your income
level.
John Tripolsky (12:47):
And I always think about this too. If anybody
else is listening, this kindafeels the same way you know, in
in my mind, the crazy world ofeverything that's going on up
there. You know, I I picture,quote, unquote, filing, air
quotes, filing taxes back, youknow, the fifties, forties, long
time ago, before we were around.I I in my mind, I almost see
(13:09):
that as, like, Pleasantville.Right?
Like, oh, form? Check. Check.Check. Mhmm.
Attach something. Staple it.Send it off. Right? Like, now
there's so many things.
Like, we mentioned phase outsand all the stuff, different
stuff. It's like tax planning,which we always talk about, is
really that's like the beacon ofeverything. Like, if you ever
wanna have control and, youknow, sticking it to the, you
(13:32):
know, whatever, you come up withyour own term, out there with
having to shell out so much,like, get into it. And we got
tons of content on that. So ifanybody's interested in that,
check that out.
Just Google tax planning,teaching tax while you find a
million things.
Chris Picciurro, CPA (13:47):
And the thing to consider about phase
outs is these are federal phaseouts. States have different
conformity. Again, not to keepplugging defeating taxes, but we
have a lot of some we've beentalking about that in in our
private Facebook group a littlebit. However, the phase out
think about a $100,000 for asingle or head of household
person. They start gettingphased out of this deduction.
(14:07):
Okay? Deduction could besignificant. Now if you make a
$100,000, should you be paying$20,000 a year of automobile
interest? Probably not, but youdon't you never know. That's
modified adjusted gross income.
What if you make 200,000, butit's all rental income and you
get a bunch of depreciationdeduction? Here's another
thought, John. A $100,000 inrural Mississippi of income or a
(14:33):
small town goes a lot or collegetown, let's say, goes a lot
farther than Silicon Valley.Right? So it it's someone could
be barely making it in one placeand living in a completely
different lifestyle than theother.
So, just a thought.
John Tripolsky (14:53):
We should do a whole other episode on tax
planning and residency planningand have it sponsored by real
estate agency. That'snationwide. We'll move
everybody.
Chris Picciurro, CPA (15:01):
We're working on that.
John Tripolsky (15:01):
We'll move everybody from California over
to the East.
Chris Picciurro, CPA (15:05):
That sounds like a good plan.
John Tripolsky (15:06):
I digress.
Chris Picciurro, CPA (15:07):
So let's look at we're gonna do three
case studies. Let's first talkabout Emma. She's single,
seemingly looking to mingle.She's got a good job. She got
makes $90,000 of income.
Her modified adjusted grossincome is 90,000. She bought a
new vehicle. It's a qualifiedvehicle, so it's it's it was
assembled in The US, and it thefinal assembly was in The US. So
(15:32):
could a vehicle maybe not befirst they go doesn't mean every
part has to be from The US.Final assemblies in The US,
personal use, new vehicle.
She had $2,800 worth of vehicleinterest. Now interesting
thought. Are these companies nowloan come these these lending
(15:52):
lenders, are they going toreport this? So we're gonna keep
our eyes out there for new taxforms. Or is this gonna be
because the IRS doesn't wanteveryone to just claim those
interest deduction without itgetting reported to them.
Like, mortgage interest isreported, you know, to the IRS.
Yeah. So, anyway point. Sodeduction at $2,800. She's under
(16:14):
the $100,000 limit.
The $2,800 the $100 of interestpaid is under the $10,000
maximum deduction. Emma is happywith her new vehicle. She's hot
to trot on the town as sheenters the dating scene, and she
drives around in confidenceknowing that she got a 2,800
deduction.
John Tripolsky (16:34):
As long as her tax professional knows about
this.
Chris Picciurro, CPA (16:36):
So Exactly. Yes. Now we've got
Marcus. Marcus is a head ofhousehold. So head of household
means he's he's single.
However, he does have qualifieddependent. He's modified
adjusted gross income's 95,000,and he paid $93,500 worth of
interest. So let's think aboutthis. Head of household. Okay?
(16:59):
Magi? What's oh, acronym. John,you've killing it on those
that's thank you. Yes. You'vebeen killing it on the on that.
But the Magi is our acronym fortax you know, in the tax world.
But, but he'll get the under a100,000, interest paid, 3,500
fully deductible. Marcus ishappy. Final case study, Olivia.
(17:23):
Olivia is also single.
Olivia is doing well forherself. She's making a
$140,000, but Olivia wants oneof those nice whips. So she has
$10,800 worth of mortgageinterest paid. Oh, she did buy
US made luxury vehicle, so theso the vehicle actually
qualifies. But let's talk abouttwo things with Olivia.
(17:47):
First of all, hey, girl. She'ssingle, making a $140. I don't
know about allocating that manyresources to a vehicle, but we
ain't her financial adviser. Wewe we encourage Olivia to jump
into the defeating taxes privateFacebook group, though. Anyway,
her modified adjusted grossincome is $1.40, so she's over
that $100,000 threshold.
(18:07):
And the interest is $10,800,which is over the $10,000 limit.
So we've got a couple thingsgoing on. Let's first talk about
the the maximum deduction. Themaximum deduction is gonna be
$10,000. So the fact that shepaid 10,800 is 8 that 800 the
additional 800 is not gonna bedeductible at all.
Her MAGI is $1.40. It's $40,000over the threshold. Remember, we
(18:32):
said for every thousand, youlose $200 of deduction. So she's
40 over. 40 times $200 is an$800,000 phase out.
I know that's tricky. So hermaximum deduction would be the
$10,000 of mortgage interestpaid or mortgage interest, car
loan interest paid. Remember,she was at ten eight, but she
(18:54):
only gets credit for 10 minusthe phase out of $2,000. So if
she's in a 32% marginal taxrate, she saves $640. However,
Marcus, if he's in a 22%marginal tax rate, he actually
saves $770.
So Marcus saves more money thanOlivia but pays a third less
(19:16):
loan interest because of hisincome. Isn't that interesting?
John Tripolsky (19:20):
No problem. Do have to go back. You know, I
made the Ferrari reference sincethey're made in Italy. Does not
qualify. It would not qualifyfor this at all.
And on I did just look this up,and I believe I believe it's on
moneygeek. I don't wanna quotemoneygeek.com. I don't wanna
quote it a 100% because I don'tknow where my quick Google
search is actually pulling thisfrom. But just so everybody
knows, if you're if you haven'tbeen in the the auto new auto
(19:41):
market here in a while, and thisis not this is just in general,
not for US manufacturer, butthey're about 50,000. Comes up
49,000 and some changes, theaverage new vehicle price.
So, you know, even at a lowinterest rate, that's
significant savings if somebodyqualifies and checks all those
boxes. Right?
Chris Picciurro, CPA (19:59):
That's nailed it. So, here's the thing,
cash flow versus tax flow. Noteveryone, everyone's situation
is unique. What we hear, what wesee is saying, dollars $10.00 a
mortgage of, I keep sayingmortgage interest because I'm
just so used to that, right?Automobile interest, yes, that's
the maximum but be cognizant offiling status, modified adjusted
(20:22):
gross income, and how much youpaid and then that calculates
your tax savings.
John Tripolsky (20:27):
I love it. I love it. And this was a good
one. Again, that we dove into. Iknow there's a lot of interest
on some of the reels that we'veput out there on YouTube.
So everybody check those out.There's a lot of them. 600 plus
videos now. Just bragging onourselves. And I'm hardly in any
of them.
So it's good. It's mostly thishandsome gentleman that's in it.
And to kinda give you a littlebit of a preview too before we
let you go, I'm looking on ourlist of our roster of other
(20:48):
topics we're gonna talk about,Chris, and and in no order,
really, because our schedule onthese changes. But looking, you
know, over the next month, monthand a half, we're getting some
pretty good stuff, man. So we'relooking back, and not looking
back, technically, at the IRSdata book that they put out
every year.
We're gonna dive deep into somenumbers, some follow the facts
that they usually put out. We'regetting into material
participation, what that meanswith somebody good for the real
(21:11):
estate investors out there.We're also gonna get into the
one fun one I know that I canraise Chris's blood pressure on
somehow or another. I will findthat way again. We're gonna talk
about LLCs.
We're gonna talk about Good job.Forming them.
Chris Picciurro, CPA (21:25):
I look forward to it, and, I wanna
thank everyone for joining us.
John Tripolsky (21:30):
Absolutely. Absolutely. Again, everybody
check out definitaxes.com.That's a private Facebook group.
Chris had mentioned there acouple times and also the
YouTube channel.
Check that out. Subscribe. Don'tbe lazy. And we'll see everybody
back here again next week on theteaching tax flow podcast. Same
place, different time, differentday of the week, different date.
Same day of week, differentdate. Completely different topic
(21:50):
here on the show. Tried to do itthere, and I messed it up as bad
as Chris saying. Assembly,assemble, and all that stuff.
You get jumbled.
Have a good one.
Disclaimer (22:01):
The content provided is educational purposes only. We
encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker dealer.
The content of this podcast doesnot constitute an offer of
(22:22):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained in the memorandum.
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