Boosted Tax Deductions on Facilities for Auto Dealerships by OBBBA
The One Big Beautiful Bill Act (OBBBA), signed into law by President Donald Trump on July 3, 2025, brings significant changes and benefits to the automobile industry, particularly auto dealerships.
One of the most notable provisions is the new federal tax deduction for auto loan interest. Car buyers can now deduct up to $10,000 per year in loan interest for vehicles assembled in the U.S., a powerful promotional tool that encourages demand for dealer financing. This deduction applies to both domestic brands and specific foreign-made models assembled domestically, appealing especially to middle-income buyers.
Another key provision is the permanent extension of 100% bonus depreciation for qualified property acquired after January 19, 2025. This allows dealerships to fully deduct the cost of qualified assets such as facility improvements and equipment in the first year, improving cash flow and incentivizing investment in facilities and fleets.
The OBBBA also maintains the pass-through entity tax workaround, allowing auto dealer businesses structured as pass-through entities to continue tax-efficient state tax strategies. Additionally, increased reporting thresholds for 1099 payments to $2,000 and the separate reporting of qualified overtime compensation on W-2 forms may reduce administrative burdens for dealerships.
In the buy-sell area, the ability to deduct 100% of both interest and depreciation will influence how dealers allocate the price of an acquisition among goodwill, assets, and equipment. Other dealership expenses, such as floorplan interest and loaner fleet depreciation, are also now 100% deductible.
The OBBBA includes a provision that removes a limitation on how much interest can be deducted for facility improvement projects in the automobile industry. In the buy-sell area, this change allows dealers to take both depreciation and interest deductions.
However, some provisions are less favourable for dealers focused on electric vehicles. The OBBBA ends federal EV tax credits after September 2025 and imposes new annual fees on EVs and hybrids, potentially reducing EV sales incentives.
Overall, the OBBBA offers substantial tax savings and demand stimulus for traditional auto dealerships, especially those selling U.S.-assembled vehicles and investing in facilities and financing programs. Dealers must balance these benefits with potential downsides related to EV incentives.
Ken Rosenfield, founder and partner at accounting firm Rosenfield and Co., notes that the change in computation now allows dealers to take both depreciation and interest deductions. He suggests that people take advantage of the car interest deduction and electric vehicle credits while they still last.
[1] Tax Notes (2025) [2] Accounting Today (2025) [3] Dealership Today (2025) [4] Forbes (2025)
- Dealers specializing in electric vehicles might face reduced EV sales incentives due to the OBBBA, which ends federal EV tax credits after September 2025 and imposes new annual fees on EVs and hybrids.
- Wealth-management and personal-finance advisors should consider recommending electric vehicle tax credits to their clients while they are still available, as suggested by Ken Rosenfield, founder and partner at accounting firm Rosenfield and Co.
- The OBBBA not only offers substantial tax savings and demand stimulus for traditional auto dealerships, but it also allows dealers to take both depreciation and interest deductions on financing programs, facilities, and electric vehicles, making it an attractive investment opportunity for businesses in the industry.
