Personal Income Tax Law: deduction from gross income: car loan interest payments.

Assembly Member Tangipa's proposal to modify California's tax code would allow taxpayers to deduct interest payments on personal vehicle loans from their adjusted gross income between 2026 and 2030. The deduction would apply to interest paid on one qualified motor vehicle loan per taxpayer, with qualified loans defined as those obtained for personal use vehicles.

The measure establishes annual reporting requirements for the Franchise Tax Board, which must track and disclose the number of taxpayers claiming the deduction and the average deduction amount. According to the bill's findings, current auto loan terms average 68 months with interest rates ranging from 6.84 to 12.01 percent. The Franchise Tax Board would submit its first implementation report by December 2027, with subsequent reports due each December through 2030. The deduction provision would expire on December 1, 2031.

The legislation modifies Section 17072 of the Revenue and Taxation Code to incorporate this new deduction while maintaining most existing conformity with federal adjusted gross income calculations. It excludes certain federal deductions related to teacher expenses and whistleblower attorney fees. As a tax levy, the measure would take effect immediately upon enactment.