Car dealerships across the country are rethinking inventory and financing in the wake of a major federal overhaul. The One Big Beautiful Bill Act, signed into law July 4, brings immediate implications for dealers, some positive and some negative.
Perhaps the most important and positive provision for dealers is a new federal tax deduction that allows car buyers to deduct up to $10,000 per year in loan interest if the vehicle is assembled in the United States and purchased between 2025 and 2028. These include not only domestic brands but specific models from foreign manufacturers. The deduction gives dealerships a high-octane promotional tool that beats the traditional incentives.
A tax break that specifically benefits auto lending is rare, so the provision may increase demand for dealer-arranged financing. Middle-income buyers concerned about high monthly payments may flock to dealers to get the deduction, which begins to phase out for individuals with incomes above $100,000 ($200,000 for joint filers).
On the other hand, dealers that bank on the sales of imported models may struggle to compete.
Risks for EV Sellers
Dealers heavily invested in electric vehicles also will face challenges. The One Big Beautiful Bill Act ends several green energy incentives. It repeals federal EV and used EV tax credits, effective Sept. 30, 2025. Additionally, EV charger installation credits will end after June 30, 2026.
The increased costs likely will make electric vehicles less attractive, and in areas where EV demand is already low, this could lead to slower inventory turnover or increased discounting.
More Key Tax and Policy Changes
Interest Deduction for Floorplan Financing Improved – The interest expense limitation now uses EBITDA (earnings before interest, taxes, depreciation, and amortization) permanently. This change will allow more dealerships to take bonus depreciation, especially those previously limited by floorplan financing rules.
Bonus Depreciation Back to 100% Permanently – Businesses can now deduct the full cost of qualifying assets in the year they’re placed in service, which helps dealerships investing in equipment, technology, or building improvements.
Section 179 Expensing Increased Permanently – Limit increased to $2.5 million, with phaseout starting at $4 million.
Federal Corporate Average Fuel Economy Rules Changed – Penalties under CAFE are eliminated.
Limits on Deductibility for Employer-Provided Meals – Starting in 2026, if you provide snacks, meals during meetings, or food while employees work overtime – and it’s not part of their pay – you won’t be able to write off those costs anymore.
Estate Tax Exemption Increased – In a change that will be helpful for dealership owners planning to pass down their business, the estate/gift tax exemption is now $15 million per person, or $30 million per couple.
1099 Reporting Threshold Increased – You only need to issue a 1099 if you pay a contractor or vendor more than $2,000, reducing paperwork.
SALT Deduction Cap Increased, With Limits – The state and local tax (SALT) deduction cap is now $40,000 through 2029, phasing out for those earning more than $500,000. PTET (pass-through entity tax) rules won’t change, which is good news for many dealership owners.
Qualified Business Income Deduction (QBID) Made Permanent – The 20% pass-through deduction for qualified business income will not expire.
Tax Cuts Made Permanent – The lower individual tax brackets from the 2017 Tax Cuts and Jobs Act are now permanent and will continue to be adjusted for inflation.
How Dealerships Can Respond and Thrive
The One Big Beautiful Bill Act creates an immediate need to adjust inventory strategies, emphasize financing options, and rethink marketing approaches. Dealerships that respond quickly can position themselves for growth and long-term success.
Now is the time to assess how these changes impact your business strategy. The CBM Automotive Dealership Team has been serving the industry for over a century and is ready to help you focus on what matters most. Whether you’re a current client or exploring the implications of these changes for your business, our team is here to help — reach out to start the conversation.
Now is the time to assess how these changes impact your business strategy. The CBM Automotive Team has been serving the industry for over a century and is ready to help you focus on what matters most. Connect with your advisor or reach out to our team to start the conversation.
Please note:
This information is current as of the date of writing and is subject to change as additional guidance becomes available. We will continue to monitor developments and share updates accordingly.
This content is for general informational purposes only and should not be relied upon as legal, accounting, or tax advice. For guidance specific to your situation, we encourage you to contact us directly.
