Under the new tax law enacted by President Trump, individuals can claim a tax deduction for interest on vehicle loans starting in 2025. This deduction is applicable to new, U.S.-assembled vehicles, including various types of light vehicles. Taxpayers may deduct up to $10,000 in interest payments annually, but there are eligibility restrictions based on income levels. The law aims to make car ownership more affordable and support domestic auto production, although it may not benefit all potential buyers due to specific qualifications and income limits.
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.
Vehicles must be new, assembled in the U.S. And the loans must be issued no sooner than this year, to list just a few qualifications.
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.
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.
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