The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025 and provided a variety of new provisions, as well as extending or making permanent several Tax Cuts and Jobs Act (TCJA) provisions from 2018. As we move past the initial understanding of the Bill itself, new questions arise:
- Where do we go from here?
- What do these changes mean for me and my dealership?
- Are there any steps I should be taking now to better situate the dealership as we look ahead to these provisions going into effect?
This article will dive deeper into the top five provisions that will have the greatest impact on auto, commercial truck, and machinery and equipment dealerships across the country.
Top Five OBBBA Considerations for Dealers
1. IRC Section 168: 100% Bonus Depreciation Deduction
IRC Section 168, more commonly referred to as bonus depreciation, was previously set to sunset completely by the end of calendar year 2026. The OBBBA now permanently modifies and extends the depreciation deduction to 100% expensing of qualified property for federal purposes for property acquired and placed in service after January 19, 2025. Be aware that there are special rules for assets that were subject to a written binding contract prior to January 19, 2025 but were not placed in service until after January 19, 2025. At the time of this article, we are still awaiting additional guidance from the IRS and the Treasury regarding the binding contract rules and any potential planning opportunities with those rules, like those for self-constructed property.
Examples of assets eligible for bonus depreciation include qualifying service loaner vehicles, qualifying lease and rental fleet equipment, shop equipment and furniture purchases, land improvements, and non-structural interior building improvements.
It is important to consider state conformity of bonus depreciation. Many states do not allow bonus depreciation, creating a difference between federal and state income for reporting purposes. Otherwise, this provision should be seen as an overall positive change that eliminates the constant uncertainty over the potential future elimination of bonus depreciation. The dealers most likely to see the highest impact from this are those that have not been eligible to take advantage of 100% immediate expensing for the last few years and have instead been using the Section 179 expense. These entities may include dealerships owned by certain trusts and/or dealerships that have passive owners who are unable to deduct §179 expenses at their personal return levels.
2. IRC Section 163(j) Interest Limitation – Calculation Change
The Section 163(j) Interest Limitation calculation was originally included in TCJA tax legislation beginning in tax years after December 31, 2017. At the time, the limitation was based on interest expense deductions in excess of 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA). Beginning in tax years after December 31, 2021, the limitation calculation shifted to 30% of EBIT. The removal of depreciation and amortization addbacks has caused significant interest expense limitations for some companies, and for auto and commercial truck dealers, it has impacted the ability to take bonus depreciation due to the interplay between §168 bonus depreciation and floor plan financing interest. Now, the OBBBA shifts the calculation back to 30% of EBITDA for tax years beginning after December 31, 2024. This calculation change back to EBITDA currently has no expiration date.
Beyond the current year interest expense, the shift back to EBITDA in 2025 may also release previously disallowed interest expense at either the entity or individual level. Depending on the level of disallowed interest compared to income, it is possible that this release of previously disallowed interest will create tax deductions over multiple years compared to book income. Dealers should consult with their tax provider regarding the size and scope of any potential past interest expense limitations that may exist for planning purposes.
It should also be noted that RV and trailer dealers can now exclude floor plan financing interest expense from the limitation calculation in a year where an interest limitation would otherwise occur. This change in eligibility could be extremely significant, especially for highly leveraged dealerships in the RV and trailer industry. While machinery and equipment dealers and agriculture equipment dealers qualify for this exception, construction and forestry equipment dealerships do not. If you are eligible and are required to use the floorplan exception, you cannot take bonus depreciation in the same year.
3. Section 199A: Qualified Business Income (QBI) Deduction
Another provision from TCJA was the Section 199A deduction available to qualified business income from pass-through entities (PTEs). The provision provides a potential 20% deduction on QBI reported at the individual return level. The provision was previously set to expire at the end of 2025; however, OBBBA has made the 20% deduction permanent. Making the deduction permanent maintains the attractiveness of eligible PTE types, such as partnerships and S corporations. PTEs are known for their flexible agreements and avoidance of the double taxation that C corps experience.
Operating dealerships in the appropriate PTE structure should be eligible for the §199A deduction without issue. Where circumstances allow, it is worth consulting with your tax advisor on potential planning opportunities surrounding entity ownership and lease arrangements with related real estate entities to help ensure they are also eligible for the 199A deduction.
4. Electric Vehicle & Infrastructure Credits
The Inflation Reduction Act (IRA) expanded various credits available to consumers and business taxpayers for purchasing certain new and used electric vehicles (EVs). As a result, dealers were required to report clean vehicle sales to the IRS in real time with the ability to transfer the credit to consumers as part of the transaction. The credits were nuanced with various limitations; however, many taxpayers were able to utilize the credits, making EV purchases more attractive to consumers. These credits, coinciding with efforts from the Environmental Protection Agency (EPA), original equipment managers (OEMs), and other agencies that would require dealers to have a certain percentage of EV vehicles on their lot, may have led dealers to invest in more EV infrastructure and vehicles.
As of September 30, 2025, EV credits for new and used vehicles will be repealed. Dealers pushing to have a higher percentage of EVs on their lot may notice that this inventory is slower to move and may want to consider other planning strategies and incentives to move this inventory. According to Kelley Blue Book, 87% of consumers who purchased an EV took advantage of the tax credit.1 With the credit opportunity now taken away, we anticipate dealers may see a negative impact on EV sales.
Dealers should be diligent in educating internal team members and consumers about the upcoming repeal of EV credits and may want to put more focus on EV sales to try tp move as much inventory as they can before the expiration of the credit.
In addition, the IRA modified eligibility for alternative fuel vehicle refueling equipment commonly known as EV charging stations. Under these modifications, business taxpayers were only eligible for a 6% credit if the property was located in an eligible zone set by the IRS. There was potential for up to a 30% credit if certain wage and apprenticeship requirements were met; however, the complexity of the rules led many dealers to the 6% cap if they were not completely ineligible based on the EV installation location. The OBBBA accelerated the credit eligibility installation deadline to June 30, 2026, more than six years earlier than the previous deadline of December 31, 2032. Dealers should evaluate plans for any upcoming EV charger projects and consider these changes in coordination with potential credit eligibility.
5. Consumer Vehicle Loan Interest Deduction
Most relevant to the customer, the OBBBA introduced a deduction for tax years 2025 through 2028 of up to $10,000 per year for certain personal consumer car loan interest on new vehicles (consumers cannot take the deduction on pre-owned vehicles). The deduction is above the line, meaning taxpayers do not have to itemize their deductions to take advantage of this.
The deduction begins to phase out for taxpayers whose modified adjusted gross income (MAGI) exceeds $100,000 for single filers and $200,000 for joint filers. The phaseout is $0.20 per $1,000 of income that exceeds the MAGI limits, with a complete phaseout at $50,000 of income over the MAGI limits. Other notable nuances include, but are not limited to:
- The indebtedness must be incurred after December 31, 2024.
- The vehicle must be for personal use.
- The vehicle final assembly must take place in the United States.
- The vehicle must be under 14,000 pounds.
- The vehicle must be categorized as a motor vehicle under the Clean Vehicle Act.
- Interest paid on lease financing is not eligible.
With the new rules, lenders will be expected to file new forms with the relevant information needed by consumers to determine the deductibility of their car loan interest. While it appears auto dealers will not have any new regulatory actions related to the interest deduction, auto dealers and their personnel should be educated about the deduction and its applicability to eligible vehicles.
How Forvis Mazars Can Help
With a practice of more than 200 dealership professionals, our team is prepared to help you gauge OBBBA’s impact, understand how it affects your dealership group, and help you plan and strategize your next steps.
The OBBBA is a significant tax bill with a wide variety of implications, a few of which are highlighted in this article. Forvis Mazars continues to analyze and help our clients prepare for what is to come next. For more on OBBBA, visit our Washington National Tax Office resource center.
Please reach out to a professional at Forvis Mazars to discuss how these regulations may impact your dealership group.
- 1“Study: EV Tax Credit Influenced Many 2024 Buyers,” kbb.com, December 2, 2024.