Webinar Recap: The OBBBA’s Impact on Dealerships

Federal Tax Highlights for Dealerships

The webinar’s most impactful takeaways centered on several key federal tax provisions that have historically been a point of concern for dealerships.

Bonus Depreciation is Back, for Good

The OBBBA permanently restores 100% bonus depreciation for property placed in service after January 19, 2025. This is a crucial win for dealerships, as it allows for the immediate expensing of major equipment and property investments, providing valuable tax relief. The previous phase-out, which began with the TCJA, was a pain point, but this new law offers certainty and a powerful incentive for capital expenditures.

Interest Expense Limitations Are Eased

The OBBBA provides a major reversal on the interest expense limitation under Section 163(j). The new law allows businesses to once again add back depreciation and amortization when calculating their adjusted taxable income (ATI). This change is a game-changer for many dealers, as it offers more flexibility to fully deduct business interest expenses, particularly for those with significant debt loads.

A New Selling Point: The New Car Interest Deduction

A new “above-the-line” deduction was introduced, allowing consumers to deduct up to $10,000 in interest on new passenger vehicle loans between 2025 and 2028. While it comes with income thresholds and for vehicles assembled in the U.S., it does bring dealerships a new tool for sales teams and F&I managers to use. Dealerships should highlight this benefit for customers purchasing new, U.S.-assembled vehicles for personal use. It’s an incentive that could drive sales, but it’s crucial for staff to avoid giving specific tax advice to customers. For the buyer and vehicle combination that qualifies, it could sway them into a purchase knowing the buyer can gain additional tax savings thus reducing the cost of the vehicle.

State and Local Tax (SALT) Impacts and Other Key Changes

Mark Rossetti highlighted the positive state-level implications, noting that many states conform to federal changes. A major development is the increase in the federal SALT deduction cap from $10,000 to $40,000. While this provides more leeway for individual taxpayers, it’s also a crucial point for businesses to consider, especially in states with Pass-Through Entity Tax (PTET) regimes.

Other notable changes include:

• The Section 179 expensing limit was increased to $2.5 million, with a phase-out starting at $4 million.
• The Qualified Business Income (QBI) deduction was made permanent at 20%, ensuring that S-corporations and partnerships can continue to benefit from this provision indefinitely.
• A reminder was issued that the $7,500 and $4,000 EV/Clean Vehicle credits are set to expire on September 30, which is a major call to action for dealerships to aggressively promote any remaining inventory.

The newly enacted One Big Beautiful Bill Act (OBBBA) brings significant and largely positive tax changes for dealerships.

From the permanent return of 100% bonus depreciation and the easing of interest expense limitations to the creation of a new, promotable auto loan interest deduction for customers, the legislation presents numerous opportunities for financial optimization. These changes, along with the permanent extension of the Qualified Business Income deduction and a higher Section 179 expensing limit, can lead to substantial tax savings.

As these provisions become effective, dealerships should immediately engage their sales and F&I teams to understand and leverage the new benefits and proactively consult with their tax advisors to ensure they are prepared to capitalize on these legislative updates and maintain compliance.

Disclaimer: This article provides general information and should not be considered professional financial or tax advice. Please consult with a qualified CPA or financial advisor for guidance specific to your individual business needs.