What the 2025 Tax & Spending Reform Law Means for Car Buyers
By Mike Columbus – West Hills Autoplex, Bremerton, WA
If you live in Kitsap County—whether it’s Poulsbo, Bremerton, Bainbridge Island, or my new hometown of Lakeland Village in Allyn—there’s a new federal law that could impact how and when you buy your next vehicle.
On July 4, 2025, the 2025 Tax & Spending Reform Bill (H.R. 1, Public Law 119-21) was signed into law. And while the headlines focus on national tax cuts and spending changes, car buyers like you should be paying attention to what’s buried inside.
Here’s what you need to know—and how it might save you money if you act soon.
🚗 1. You Can Now Deduct Auto Loan Interest—But Only on U.S.-Assembled Vehicles
For the first time in decades, there’s a new federal tax deduction for certain car buyers:
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You can deduct up to $10,000 per year in interest paid on a car loan.
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The vehicle must be new, used for personal purposes, and assembled in the United States.
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Income limits apply: Full deduction up to $100,000 AGI (individual) or $200,000 AGI (joint filers), phasing out above those limits.
📎 Source: Kiplinger, The Week
This deduction applies to vehicles purchased from 2025 through 2028. If you're financing soon, this could mean hundreds—or even thousands—saved on your tax return. Just make sure your vehicle was assembled in the U.S. (I can check that by VIN for you.)
⚡ 2. The Federal EV Tax Credit Ends September 30, 2025
This one’s important: If you're considering an electric or plug-in hybrid vehicle, the federal EV tax credit is going away sooner than most people think.
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The up-to-$7,500 Clean Vehicle Credit for new EVs and the $4,000 credit for qualifying used EVs will expire after September 30, 2025, regardless of vehicle type or buyer.
📎 Source: Reuters, TurboTax
To qualify, the vehicle must meet strict sourcing and assembly requirements, and the buyer must meet income limits.
Bottom line: You must take delivery by September 30, 2025, not just sign a contract. After that, no federal EV credit will be available.
🌲 3. Washington State EV Sales Tax Exemption—But It's Ending Too
Here in Washington, we’ve had one of the best state EV incentives in the country—but that’s ending soon too.
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New EVs priced under $45,000 (or under $55,000 for trucks/SUVs) are exempt from Washington state sales tax on up to $15,000 of value.
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Used EVs under $30,000 may qualify for a partial sales tax exemption.
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This exemption expires on July 31, 2025.
📎 Source: WA Dept. of Revenue, SnoPUD Guide
That means Washington buyers have just weeks left to combine both federal and state savings.
🔍 What This Means for You
If you're thinking about buying or leasing a vehicle in 2025, here’s my advice:
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Don’t wait. Time is running out to claim both the federal and Washington state incentives.
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Buy American-assembled. Whether gas or electric, it could mean a tax deduction or added value.
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Double-check eligibility. Not every vehicle qualifies. Let me help you make sense of it.
With the right timing and vehicle choice, you could save thousands. But with two major programs expiring—Washington’s on July 31 and the federal EV credit on September 30—you’ll want to plan now, not later.
Have Questions? I’m Here to Help.
I’ve helped hundreds of customers across Kitsap County make smart, informed vehicle decisions. If you want to be sure you’re getting every available tax advantage, I’m happy to walk you through it.
Need a car? Ask for Mike.
