Get ready for that test-drive: Senate approves tax break for auto loan interest

You are one step closer to having your auto loans be tax deductible for the first time since 1986. The U.S. Senate yesterday voted to make loan interest and sales taxes on vehicle purchases deductible from federal income taxes.

The proposal was brought forward by the National Automobile Dealers Association and was added to the economic stimulus bill. Senate approved the tax break with a 71-26 vote.

When the House approved more than $800 billion of spending increases and tax cuts, the provision was not a part of the package. A conference committee will now decided whether the provision will stay in.

According to Automotive News, NADA says that the provision on letting consumers to have their auto loans interest be tax deductible will get them back into showrooms. The group said that consumers will be able to save about $1,500 on a $25,000 vehicle.