This deduction is part of the "One Big Beautiful Bill" Act (OBBB) championed by Transportation Secretary Sean Duffy and the Trump administration to encourage the purchase of U.S.-assembled vehicles.
Key Details of the Tax Deduction
This is an interest deduction, not a direct tax credit on the purchase price of the car.
Amount: You can deduct up to $10,000 in interest paid on your car loan per year.
Active Dates: The loan must be taken out for a new vehicle purchased between January 1, 2025, and December 31, 2028.
Eligibility Criteria:
New Vehicle: The vehicle must be new (not used or leased).
U.S. Assembly: The vehicle must have its "final assembly" in the United States. Buyers should check the window sticker or use the NHTSA VIN Decoder to confirm the final assembly point.
Personal Use: The car must be for personal use, not business.
Income Limits: Taxpayer's Adjusted Gross Income (AGI) must be below the phase-out limits (approximately $100,000 for single filers and $200,000 for joint filers).
Loan Type: The deduction applies only to loans secured directly by the new vehicle, not refinanced loans (unless the refinanced loan meets all original criteria), home-equity lines, or cash purchases.
Tax Filing: You can claim this deduction even if you take the standard deduction, as it's an adjustment to income rather than an itemized deduction. Your lender will provide a statement of the total interest paid for the year.