Brace yourself for a rare government perk that might save you money on your next car purchase.
According to Kiplinger, a new tax deduction for auto loan interest, part of the "One Big, Beautiful Bill" (OBBBA) signed into law on July 4, 2025, offers up to $10,000 per year in savings for buyers of qualifying U.S.-assembled new vehicles purchased between 2025 and 2028.
Last year, Americans snapped up over 15 million new vehicles, with 80% relying on financing to seal the deal. With average car prices hovering at $48,000 in 2025, per Kelley Blue Book, and interest rates averaging 8.64%, the monthly interest on a 5-year loan can hit about $187. That’s a hefty burden for the average family.
Enter the OBBBA, signed into law on July 4, 2025, during Donald Trump’s second term. This sweeping legislation extends many tax breaks from the 2017 Tax Cuts and Jobs Act while introducing fresh relief for car buyers.
The standout feature is the auto loan interest deduction, letting buyers write off up to $10,000 annually on qualifying loans. This benefit applies to purchases from 2025 through 2028, starting with loans after December 31, 2024. It’s a temporary measure, expiring after 2028.
Better yet, you don’t need to itemize to claim it—it’s an above-the-line deduction. But there’s a catch: the vehicle must be new and assembled in the U.S. Imported models from brands like Honda or Toyota often won’t qualify unless built here.
Eligibility isn’t universal, and the fine print matters. The deduction phases out for individuals earning over $100,000 or couples above $200,000. ATVs, trailers, and campers are explicitly excluded.
Electric vehicles and plug-in hybrids can qualify if U.S.-assembled, but the OBBBA ends the federal EV tax credit of up to $7,500 for new EVs and $4,000 for used ones after 2025. Only a handful of new EVs from manufacturers under the 200,000-unit sales cap get a one-year extension. Plus, EV owners face new annual fees of $250, and hybrids get hit with $100.
Supporters like Rep. Bill Huizenga (R-Mich.) call it “a win” for taxpayers and auto workers. He argues it “provides financial motivation” to buy American-made vehicles. Sen. Bernie Moreno (R-Ohio) credits Trump for ensuring cars are both made and affordable here.
Yet, Trump’s 2025 auto tariffs—slapping a 25% levy on imported vehicles and parts—complicate the picture. Cox Automotive and Kelley Blue Book note a 2.5% spike in average new vehicle prices by April 2025, far above typical increases. Some foreign models jumped by $5,000 to $10,000, per True Car.
Even U.S.-assembled vehicles aren’t immune, with imported parts adding $2,000 to $3,000 in costs. Most imported cars hit by tariffs don’t qualify for the deduction due to the assembly rule. It’s a mixed bag for buyers seeking relief.
The fiscal cost is steep, too, with the Joint Committee on Taxation estimating a $57 billion revenue loss. Is this deduction a savvy boost or a budget buster? Cox Automotive’s Jonathan Smoke doubts its impact, suggesting it’s “not as exciting” for driving sales.
For the average car owner paying $2,000 yearly in interest, Cox Automotive estimates savings of about $400 on taxes under the initial House GOP plan. That’s real money, but only if you qualify. Weigh the numbers before banking on this break.
So, what’s your move? If you’re eyeing a new, U.S.-built ride between 2025 and 2028, crunch the loan costs and income limits to see if this deduction works for you. For liberty-minded savers, it’s a rare chance to keep more of your cash—just don’t expect miracles in a tariff-tightened market.