Streamlined Facility Tax Breaks Boosted for Car Dealerships by OBBBA
The One Big Beautiful Bill Act, also known as H.R. 1, has brought significant changes to the tax landscape for car dealers in the United States. Here are the key benefits for dealers, focusing on interest deductions, bonus depreciation, and estate tax exemptions.
The most important provision for dealers in the One Big Beautiful Dealer-Friendly Act is the reinstatement of the 100% deduction for bonus depreciation of qualified assets for all property acquired beginning Jan. 20, 2025, which was previously 40%. This change offers a substantial boost to dealers looking to invest in new assets.
However, the primary tax-related advantage for dealers in this act centers on the new loan interest deduction. From 2025 to 2028, buyers can deduct up to $10,000 per year in loan interest on new vehicles assembled in the United States. This incentive encourages consumers to finance their purchases through dealers, potentially boosting sales and promoting domestic assembly jobs.
The interest deduction serves as a powerful promotional tool for dealerships since it helps lower the effective cost for buyers, especially middle-income individuals. This could increase demand for dealer-arranged financing.
Ken Rosenfield, founder and partner at accounting firm Rosenfield and Co., states that the changed computation allows dealers to take both depreciation and interest deductions. This means that dealers can enjoy a more substantial tax reduction when investing in new assets.
In the estate tax area, the One Big Beautiful Dealer-Friendly Act has increased the exemption for individuals to $15 million and for couples to $30 million. This change offers a significant relief for many dealers, particularly those with substantial estates.
Rosenfield also suggests that this is a good time for dealers to start gifting due to the increased estate tax exemptions.
Other dealership expenses, such as floorplan interest and loaner fleet depreciation, are also now 100% deductible. This means that dealers can reduce their taxable income even further.
It's worth noting that the elimination of the purchase and lease tax incentives for electric vehicles under the One Big Beautiful Bill Act ends on September 30, 2025.
In summary, the main benefit to car dealers is a targeted federal tax deduction on auto loan interest designed to incentivize purchases of U.S.-assembled vehicles and boost dealer financing leverage. The increased estate tax exemptions offer relief for many dealers, and the 100% deductibility of other expenses further reduces their taxable income. However, more research may be needed to fully understand the impact of the changes to bonus depreciation on dealers.
Electric vehicles could see a decrease in tax incentives, as the elimination of purchase and lease tax incentives for them under the One Big Beautiful Bill Act ends on September 30, 2025. On the other hand, dealers might experience financial gains with the reinstatement of the 100% deduction for bonus depreciation of qualified assets and the increase in estate tax exemptions, which could encourage them to invest more in new assets and gifting.
