Understanding the Car Loan Tax Deductions in Trump’s New Tax Bill

Last updated Jul 11, 2025

Exploring The Benefits of President Trump’s “Big, Beautiful Bill” Tax Law

As Wisconsin Senator, Ron Johnson discloses on ‘Varney & Co.,’ the newly enacted tax bill by President Donald Trump, referred to as the “big, beautiful bill” offers substantial benefits. One such advantage is the possible tax deductions on car loan interest for eligible vehicles, with totals as high as $10,000.

Eligibility Criteria for the Car Loan Interest Tax Deduction

The new tax law stipulates several conditions to be eligible for this temporary income tax deduction. The vehicles in question, as well as their loans, need to meet specific criteria.

Vehicles eligible must be new and purchased between 2025 and 2028. These include cars, vans, minivans, SUVs, pickup trucks, and motorcycles weighing less than 14,000 pounds with at least two wheels. Vehicles should only be for personal use, not for business or commercial purposes. The final assembly of these vehicles must also take place in the U.S.

Automotive expert, Lauren Fix, explains that final assembly refers to the full integration of primary vehicle components like the engine, transmission, body, and chassis in a U.S-based manufacturing facility.

Loans on these vehicles need to be standard and secured auto loans, and the car’s Vehicle Identification Number (VIN) needs to be reported on tax returns.

Income Caps and Interest Deduction

While up to $10,000 in car loan interest is deductible, there’s an income cap. For single tax filers earning more than $100,000 annually, or joint tax filers making over $200,000, the deduction reduces by $200 for every $1,000 over the limit.

Impact on American Manufacturing and Jobs

Fix suggests that the requirement for U.S. final assembly may benefit American manufacturing and jobs. Particularly beneficial are companies like Ford, General Motors, Honda, Toyota, BMW, and Tesla, all of which have substantial U.S. production facilities. However, lower-income filers might not benefit from this deduction.

She points out, “The exclusion of used vehicles and imported models could disadvantage lower-income buyers who often opt for used or affordable imported cars – 80% of cars under $30,000 are imported.”

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