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Millions of people receive a federal tax deduction for the interest they pay on home loans. Under President Donald Trumps new tax-cut law, many people for the first time also could claim a tax deduction for interest on their vehicle loans. The new tax break will be available even to people who don’t itemize deductions. But there are some caveats that could limit its reach. The vehicles must be new, not used. They must be assembled in the U.S. And the loans must be issued no sooner than this year, to list just a few qualifications. Here are some things to know about the new auto loan interest tax deduction: Candidate Trump promised an auto loan interest tax break Trump pledged while campaigning last year to make interest on car loans tax-deductible. He said it would make car ownership more affordable and stimulate massive domestic auto production. The idea made it into the big tax-cut bill passed by Congress, which Trump signed into law July 4. The law allows taxpayers to deduct up to $10,000 of interest payments annually on loans for new American-made vehicles from 2025 through 2028. It applies to cars, motorcycles, sport utility vehicles, minivans, vans and pickup trucks weighing less than 14,000 pounds, a threshold referred to as light vehicles. But it only applies to vehicles purchased for personal use, not for fleets or commercial purposes. The tax break can be claimed starting on 2025 income tax returns. But the deduction phases out for individuals with incomes between $100,000 and $150,000 or joint taxpayers with incomes between $200,000 and $250,000. Those earning more cannot claim the tax break. Millions of buyers could benefit, but millions of others will not U.S. automobile dealers sold 15.9 million new light vehicles last year, a little over half of which were assembled in the U.S, according to Cox Automotive. It says around 60% of retail sales are financed with loans. After excluding fleet and commercial vehicles and customers above the income cutoff, an estimated 3.5 million new vehicle loans could be eligible for the tax break this year, if purchasing patterns stay the same, said Jonathan Smoke, chief economist at Cox Automotive. It’s the assembly plant, not the automaker’s headquarters that matters The tax break applies to vehicles assembled in the U.S., no matter where the company making them is headquartered. All Tesla vehicles sold in the U.S. are assembled in this country. But so are all Acura brands, the luxury model of Japanese automaker Honda. Last year, 78% of Ford vehicles sold in the U.S. were assembled in this country, according to Cox Automotive. But customers wanting the tax break will need to pay attention to specific models. While the Ford Mustang is assembled in Michigan, the Mustang Mach-E is built in Mexico. General Motors assembles all of its Cadillacs in the U.S. But just 44% of its Chevrolets sold last year were assembled in the U.S., and just 14% of Buicks, according to Cox Automotive. That’s a lower U.S-assembled rate than Honda (60%), Toyota (52%) and Nissan (48%), which all are headquartered in Japan. Taxpayers could save hundreds of dollars a year The average new vehicle loan is about $44,000 financed over six years. Interest rates vary by customer, so the savings will, too. In general, the tax deduction will decline after the initial year, because interest payments on loans are frontloaded while principal payments grow on the back end. At a 9.3% interest rate, an average new vehicle buyer could save about $2,200 on taxes over four years, Smoke said. The tax savings would be less on a loan at 6.5%, which is the rate figured into calculations by the American Financial Services Association, a consumer credit industry trade group. Some people also could see a reduction in state income taxes Whereas the tax deduction for home loan interest can be claimed only by people itemizing on their tax returns, Congress wrote the deduction for auto loan interest so that it can apply to all taxpayers, including those claiming the standard deduction. On a tax form, the auto loan deduction will come before the calculation of a taxpayer’s adjusted gross income. That’s an important distinction, because many states use a taxpayer’s federal adjusted gross income as the starting point for figuring their state income taxes. If that income figure is lower, it could reduce the state taxes owed. The verdict is out on whether the tax break will boost sales At Bowen Scarff Ford in Kent, Washington, customers started asking about the auto loan tax deduction before Congress had even taken a final vote on the tax-cut bill, said General Manager Paul Ray. So he decided to promote it on the dealer’s website. A website ribbon exclaims: CAR LOAN TAX DEDUCTION NOW AVAILABLE” while also promoting an electric vehicle tax credit that is ending soon as a result of Trump’s tax-cut law. I think its going to help incentivize vehicle purchases through this year,” Ray said. Celia Winslow, president and CEO of the American Financial Services Association, concurred: For some people deciding should I buy it, should I not this could be something that tips the scale. Others remain skeptical. According to Smoke’s math, the average annual tax savings is smaller than a single month’s loan payment for a new vehicle. I dont think it moves the needle on somebody on the fence of buying a new vehicle or not,” Smoke said. “But I think it could influence their decision to finance that vehicle instead of paying cash or instead of leasing a vehicle. David A. Lieb, Associated Press
Category:
E-Commerce
Starbucks has been in a bit of a slump, facing stagnant growth as it awaits its new CEO Brian Niccols turnaround. His strategy? Nicer stores you want to sit in. Protein-loaded coffee. And now . . . turning every day at Starbucks into a viral drop. The company is launching a secret menu in its app today, building off the momentum of its not-so-secret menu broadcast channel on Instagram. Secret menus, of course, are irresistible to the fleshy consumer brain. A mystery and treat in one! But in the case of Starbucks, its part of a brilliant promotional strategy by its new chief brand officer Tressie Lieberman. How will Starbuckss Secret Menu work? The menu will contain rotating offers for drinks. But instead of being born inside its Seattle headquarters coffee lab, these drinks are created by fans on social media who use Starbuckss customization options to create particularly alluring beverages. Thats what people do today: create their own Starbucks order, says Lieberman. And so how do we tap into that? Indeed, customization is a big part of Starbuckss appeal; you can order a drink just as you like it. But its menu has become so sprawling and complicated for baristas to produce that Niccol has actually cut it back by nearly a third to simplify production. Whats brilliant about the Starbucks Secret Menuwhich is launching with a $25,000 prize to stoke interestis twofold: Instead of creating a TikTok trend, it can simply ride a TikTok trend, since people are already promoting their own custom drinks on the service. But the second component is just as important for a company with tens of thousands of locations worldwide. These glitzy, viral drinks are being made with the ingredients Starbucks already has lying around. In other words, its all turnkey. Starbucks doesnt need to spin up a whole production supply chain to sell the equivalent of a McRib. It can just rearrange its food stuffs to make something novel, a lot like Taco Bell combines its shells and sauces to make something newbut crowdsourced. This strategy is a far cry from how Starbucks used to look at viral creations: as operational headaches that were at odds with its own business model. Instead, Starbucks can analyze a viral menu item, decide if it needs to be tweaked for scale, and then share it back with its audience in a way that can work. Some of the best ideas are coming from customers. Customers decide what’s in; customers decide what’s cool, says Lieberman. [With the Secret Menu] We’re really just working to help put media behind [fans] and get more reach around new ideas. It’s a lot about being visible, visible to our audience, and being really strategic about how we approach these different trends as well, says Lieberman. She points to a recent viral drink called the Gummy Shark, where TikTokers took the Summer Berry Refresher and added cold foam so it would taste like the popular candy, as a recent proof point of this strategy. That’s a gift from our customers, says Lieberman. Let’s jump on that. Let’s create content around it and celebrate it, instead of moving away from it. In other words, with its new Secret Menu, Starbucks is building a workflow so that they dont need to come up with their next hit, while ensuring that you can taste the wild thing youre gawking at online easily. (Its new point-of-sale terminals will even be getting a viral drinks tab so that if you walk into a store without your phone, you can order off this menu as well.) The only question remaining is, can a secret menu stay cool when it’s available to millions of customers? Anyone who’s ordered a speak-easy-inspired Neapolitan shake or animal style fries from In-N-Out knows . . . the answer is a sad and true, “absolutely yes.”
Category:
E-Commerce
Senate Republicans will test the popularity of Department of Government Efficiency spending cuts this week by aiming to pass President Donald Trump’s request to claw back $9.4 billion in public media and foreign aid spending.Senate Democrats are trying to kill the measure but need a few Republicans uncomfortable with the president’s effort to join them.Trump’s Republican administration is employing a rarely used tool that allows the president to transmit a request to cancel previously approved funding authority. The request triggers a 45-day clock under which the funds are frozen. If Congress fails to act within that period, then the spending stands. That clock expires Friday.The House has already approved Trump’s request on a mostly party line 214-212 vote. The Senate has little time to spare to beat the deadline for the president’s signature. Another House vote will be needed if senators amend the legislation, adding more uncertainty to the outcome.Here’s a closer look at this week’s debate. Public media on the chopping block Trump has asked lawmakers to rescind nearly $1.1 billion from the Corporation for Public Broadcasting, which represents the full amount it’s due to receive during the next two budget years.The White House says the public media system is politically biased and an unnecessary expense.The corporation distributes more than two-thirds of the money to more than 1,500 locally operated public television and radio stations, with much of the remainder assigned to National Public Radio and the Public Broadcasting System to support national programming.The potential fallout from the cuts for local pubic media stations has generated concerns on both sides of the political aisle.Sen. Mike Rounds, R-S.D., said he’s worried about how the rescissions will hit radio stations that broadcast to Native Americans in his state. He said the vast majority of their funding comes from the federal government.“They’re not political in nature,” Rounds said of the stations. “It’s the only way of really communicating in the very rural areas of our state, and a lot of other states as well.”Sen. Lisa Murkowski, R-Ala., said that for the tribal radio stations in her state, “almost to a number, they’re saying that they will go under if public broadcasting funds are no longer available to them.”To justify the spending cuts, the Trump administration and Republican lawmakers have cited certain activities they disagree with to portray a wide range of a program’s funding as wasteful. In recent testimony, Office of Management and Budget Director Russ Vought criticized programming aimed at fostering diversity, equity, and inclusion. He said NPR aired a 2022 program entitled “What ‘Queer Ducks’ can teach teenagers about sexuality in the animal kingdom.” He also cited a special town hall that CNN held in 2020 with “Sesame Street” about combatting racism. Targeting humanitarian aid As part of the package, Trump has asked lawmakers to rescind about $8.3 billion in foreign aid programs that aim to fight famine and disease and promote global stability.Among the targets: $900 million to combat HIV/AIDS, malaria and other diseases and strengthen detections systems to prevent wider epidemics. $800 million for a program that provides emergency shelter, water and sanitation and family reunification for those forced to flee their own country. $4.15 billion for two programs designed to boost the economies and democratic institutions in developing and strategically important countries. $496 million to provide humanitarian assistance such as food, water and health care for countries hit by natural disasters and conflicts.Some of the health cuts are aimed at a program known as PEPFAR, which President George W. Bush, a Republican, began to combat HIV/AIDS in developing countries. The program is credited with saving 26 million lives and has broad bipartisan support.On PEPFAR, Vought told senators “these cuts are surgical and specifically preserve life-saving assistance.” But many lawmakers are wary, saying they’ve seen no details about where specifically the administration will cut.The administration also said some cuts, such as eliminating funding for UNICEF, would encourage international organizations to be more efficient and seek contributions from other nations, “putting American taxpayers first.”U.S. leaders have often argued that aiding other nations through “soft power” is not just the right thing to do but also the smart thing.Sen. Mitch McConnell, R-Ky., told Vought there is “plenty of absolute nonsense masquerading as American aid that shouldn’t receive another bit of taxpayer funding,” but he called the administration’s attempt to root it out “unnecessarily chaotic.”“In critical corners of the globe, instead of creating efficiencies, you’ve created vacuums for adversaries like China to fill,” McConnell told Vought. Trump weighs in The president has issued a warning on his social media site directly aimed at individual Senate Republicans who may be considering voting against the cuts.He said it was important that all Republicans adhere to the bill and in particular defund the Corporation for Public Broadcasting.“Any Republican that votes to allow this monstrosity to continue broadcasting will not have my support or Endorsement,” he said.For individual Republicans seeking reelection, the prospect of Trump working to defeat them is reason for pause and could be a sign the package is teetering.Sen. Thom Tillis, R-N.C., opted to announce he would not seek reelection recently after the president called for a primary challenger to the senator when he voted not to advance Trump’s massive tax and spending cut bill. Getting around a filibuster Spending bills before the 100-member Senate almost always need some bipartisan buy-in to pass. That’s because the bills need 60 votes to overcome a filibuster and advance. But this week’s effort is different.Congress set up a process back when Republican Richard Nixon was president for speedily considering a request to claw back previously approved spending authority. Under those procedures, it takes only a simple Senate majority to advance the president’s request to a final vote.It’s a rarely employed maneuver. In 1992, President George H.W. Bush, a Republican, had some success with his rescissions request, though the final bill included some cuts requested by the president and many that were not. Trump proposed 38 rescissions in 2018, but the package stalled in the Senate.If senators vote to take up the bill, it sets up the potential for 10 hours of debate plus votes on scores of potentially thorny amendments in what is known as a vote-a-rama.Democrats see the president’s request as an effort to erode the Senate filibuster. They warn it’s absurd to expect them to work with GOP lawmakers on bipartisan spending measures if Republicans turn around a few months later and use their majority o cut the parts they don’t like.Senate Democratic leader Chuck Schumer offered a stern warning in a letter to colleagues: “How Republicans answer this question on rescissions and other forthcoming issues will have grave implications for the Congress, the very role of the legislative branch, and, more importantly, our country,” Schumer said.Senate Majority Leader John Thune, R-S.D., took note of the warning.“I was disappointed to see the Democrat leader in his recent Dear Colleague letter implicitly threaten to shut down the government,” Thune said.The Trump administration is likening the first rescissions package to a test case and says more could be on the way if Congress goes along. Kevin Freking, Associated Press
Category:
E-Commerce
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