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The United States Department of the Treasury announced the implementation of the tax deduction on automotive loan interest, included in the One Big Beautiful Bill Act signed by President Donald Trump on July 4, 2025.

@SecScottBessent announced the implementation and emphasized the benefits for families and the national industry:

Treasury is implementing President Trump’s No Tax on American Car Loan Interest, putting money back in the pockets of working and middle-class families. For new U.S.-assembled vehicles purchased in 2025-2028, eligible taxpayers can deduct up to $10,000 per year in auto loan… pic.twitter.com/jO0kNNCNOd

— Treasury Secretary Scott Bessent (@SecScottBessent) January 7, 2026

This measure allows eligible taxpayers to deduct up to 10,000 dollars annually in interest paid on loans for new vehicles with final assembly in the U.S., applicable to purchases made between 2025 and 2028.

The deduction covers loans originated after December 31, 2024, and applies to cars, SUVs, minivans, vans, pickup trucks, and motorcycles with a gross vehicle weight rating of less than 14,000 pounds, exclusively for personal use.

It does not include used vehicles, leased vehicles, or those assembled outside the U.S., which incentivizes national production and protects jobs in the American automotive industry.

The Secretary of the Treasury, Scott Bessent, highlighted that this policy «puts money back in the pockets of working and middle-class families,» since a vehicle is an essential necessity to get to work, school, or childcare, reducing monthly costs in a context of economic pressures.

The IRS and the Treasury published proposed regulations on December 31, 2025, clarifying that the deduction is «above-the-line,» meaning it is available even for those who opt for the standard deduction, and it is reported on the new Schedule 1-A of Form 1040.

Taxpayers must include the vehicle’s VIN to verify assembly in the U.S. (VINs that begin with 1, 4, or 5, according to the vehicle label or the NHTSA database).

Lenders are required to report interest exceeding 600 dollars to the IRS, with transitional relief for 2025 that allows providing the total amount of interest paid through online portals or account statements.

The deduction phases out gradually for modified adjusted gross income exceeding 100,000 dollars (single filers) or 200,000 dollars (married couples), decreasing by 200 dollars for every 1,000 dollars additional, and is completely eliminated above certain thresholds. If the loan is refinanced, the interest remains eligible under certain conditions.

This initiative fulfills a campaign promise by Trump, who proposed it in 2024 to make ownership of vehicles manufactured in America more affordable and strengthen national manufacturing.

The estimated cost of this deduction for the federal government is around 31,000 million dollars over 10 years, according to analysis by the Joint Committee on Taxation, prioritizing support for American workers over imports.

This measure is a resounding triumph for American working families, allowing the deduction of up to 10,000 dollars annually in interest on loans for new vehicles assembled in the U.S. between 2025 and 2028, putting money directly back into the pockets of the middle class, reducing essential monthly costs, and strengthening national manufacturing with a clear incentive for American production.

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About The Author Joana Campos

Joana Campos es abogada y editora con más de 10 años de experiencia en la gestión de proyectos de desarrollo internacional, enfocada en la sostenibilidad y el impacto social positivo. Anteriormente, trabajó como abogada corporativa. Egresada de la Universidad de Guadalajara.