ALDOR has published preliminary guidance on the impact of the provisions of the One, Big, Beautiful Bill Act (OBBBA) signed by President Donald J. Trump on July 4, 2025, as Public Law 119-21. OBBBA extends several Tax Cut and Jobs Act (TCJA) provisions and enacts changes to the federal tax system for businesses and individuals. ALDOR’s guidance addresses whether and how the provisions of OBBBA are tied to Alabama’s taxing regime as they relate to individuals (including sole proprietors), corporations, and financial institutions.
This guidance is preliminary and subject to revision as more information becomes available, including additional federal guidance and input from other tax administrative agencies and/or the private sector.
Research and Experimental Expenditures Notice
What is the new tax deduction for vehicle loan interest? OBBBA authorizes a new tax deduction for auto loan interest, beginning in 2025 and ending after 2028.
- Who is eligible for this deduction?
- The deduction is available for taxpayers who purchase a new vehicle with a loan on or after January 1, 2025. The vehicle must be a car, minivan, van, SUV, pickup truck, or motorcycle, weighing less than 14,000 pounds, and be used personally.
- What is the maximum annual deduction?
- Eligible taxpayers can deduct up to $10,000 per year in interest paid on qualified vehicle loans.
- What income limits apply to the deduction?
- The deduction begins to phase out for income taxpayers at $100,000 of modified adjusted gross income (MAGI) for single filers and $200,000 for joint filers. This phase out is to be calculated for Alabama purposes using Alabama AGI.
- What vehicles qualify for the deduction?
- Only new vehicles purchased with a loan on or after January 1, 2025, qualify for the deduction.
- What reporting requirements do lenders have?
- Lenders must file information returns with the IRS and provide statements to borrowers showing the total amount of interest received on qualified vehicle loans.
- What happens if I refinance a qualifying loan?
- If you refinance a qualifying loan, interest on the refinanced balance will generally still qualify if the original loan meets all eligibility requirements, is secured by the same vehicle, and the balance doesn’t exceed the original loan.
- What if my vehicle is not a new one?
- Used vehicles are not eligible for this deduction.
- What if my vehicle is not used for personal purposes?
- Business or commercial vehicles do not qualify for this deduction.
- What if my vehicle is not assembled in the United States?
- The vehicle must undergo final assembly in the United States to qualify for the deduction.
- How do I claim the deduction on my Alabama income tax return?
- The deduction may be taken on Form 40 or 40NR Schedule A, Itemized Deductions, Line 11. You must provide the date of purchase and the VIN.
If I have an originally filed 2024 return with research and experimental expenditures claimed, can I still take advantage of the immediate expense provisions in Act 2025-400? (add link to bill here)
Yes, you may file an amended return with the appropriate adjustments.
Research and Experimental Expenditures Notice
Trump Account and Contribution Program
Beginning December 31, 2025, new savings accounts (Trump Accounts) will be established for children under the age of 18. Children born after December 31, 2024, and before January 1, 2029, will get $1,000 deposited into their Trump Account. Contributions made by parents, employers, government entities, and charities may not exceed $5,000 per year per child. Employers can contribute up to $2,500 of the total cap of $5,000 per child. State and local governments, as well as nonprofits, can make uniform group contributions that do not impact the $5,000 annual cap.
Trump Account Examples:
- A baby, who is a U.S. citizen with a Social Security number, is born in 2026 and automatically receives a deposit into their Trump Account of $1,000. The money cannot be withdrawn until the child is 18 years old.
- Is the distribution taxable to Alabama?
- Yes, distributions are taxable when withdrawn.
- Is the $1,000 received taxable to Alabama?
- No, the deposit is not taxable. However, when that money is withdrawn, the distribution is taxable to Alabama.
- Is the distribution taxable to Alabama?
- A 15-year-old child, who is a U.S. citizen with a Social Security number, has grandparents who make a deposit into their Trump Account of $2,000. This child also has a part-time job, and their employer makes a deposit into their account of $2,000 as part of their benefits package.
- Is the $2,000 deposit made by their grandparents taxable to the child in Alabama?
- No, the deposit is not considered taxable income.
- Can the grandparents take a deduction on their tax return for the $2,000 deposit above?
- No, it is considered a gift.
- For the employer making the deposit, is it a deduction?
- Yes, the employer can deduct it as a business expense, like a qualified retirement contribution.
- Is it taxable to the child as part of wages received?
- Yes, it would be taxable for the child (employee) and would not be excluded from gross income.
- Is the $2,000 deposit made by their grandparents taxable to the child in Alabama?
- A young adult is ready to use the Trump Account for college and for a down payment on a house.
- Are the withdrawals taxable in Alabama?
- Alabama is tied to the federal taxation for withdrawals. If the withdrawal is taxable at the federal level, it is also taxable to Alabama. If the withdrawal is not taxable at the federal level, it is also not taxable to Alabama.
- Are the withdrawals taxable in Alabama?
This page will be updated as more information becomes available.
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