A MAJOR tax change could save car buyers up to $10,000 a year – but only if they meet six specific conditions.
The benefit comes from a sweeping tax cut and spending law signed last week by President Donald Trump.
A new tax law will let Americans deduct up to $10,000 a year in interest when buying US-made new vehicles (stock image)[/caption]
Senator Bernie Moreno (R-Ohio) helped push the law through the Senate (stock image)[/caption]
Trump’s “Big, Beautiful Bill” includes a new deduction for interest on loans used to buy eligible vehicles in the US.
The savings apply only to new cars, and only if they’re made in America.
Buyers can write off up to $10,000 per year in interest costs, a big deal, especially with current auto loan rates hovering above 6%.
To qualify, the vehicle must be purchased between 2025 and 2028.
It also must weigh under 14,000 pounds and be used only for personal, not business, purposes.
Only brand-new vehicles are eligible; used cars don’t count under the final law.
There’s also an income cap.
Single filers making $100,000 or less and joint filers making up to $200,000 can claim the full deduction, Spectrum News reported.
Above those income levels, the benefit drops by $200 for every extra $1,000 earned.
That means higher earners will see less – or none – of the deduction.
There is no official list yet of which vehicles qualify, but the rule requires final assembly in the US.
That means foreign cars won’t count, and even some domestic brands assembled overseas could miss the mark.
Senator Bernie Moreno, a Republican from Ohio, who helped push the law through the Senate, said the goal is to boost US manufacturing.
“We want people driving new cars,” Moreno said.
Electric vehicles vs gas
Pros and cons of EVs vs gasoline-powered vehicles
EV PROS:
- Convenient (when charging at home)
- Cheaper (depending on state or city)
- Cheaper maintenance, due to lack of mechanical parts
- Great for commuting
- Reduced CO2 emissions
- Federal and state tax incentives
- More performance (speed, handling – depending on the make and model)
EV CONS:
- Higher initial cost
- Higher insurance rates
- More frequent tire and brake replacement intervals
- Higher curb weight (thus causing more rapid wear on crucial parts)
- Low resale value
- High depreciation rates
- Lack of charging infrastructure
- Unreliable public charging (related: slow charging times)
- Poor winter and summer performance
- Lack of clean energy alternatives means more “dirty energy” from coal and nuclear sources
- Range anxiety
GAS PROS:
- Highly developed refueling infrastructure
- Fast refueling
- Cheaper insurance rates, depending on make, model, and configuration
- Established repair industry
- Lower initial cost
- Higher range before refueling, especially with hybrids
- Many manufacturers produce nearly emission-less engines
- Cheaper refueling, depending on the location
GAS CONS:
- Finite resource (related: heavy dependence on petroleum)
- Carbon emissions/greenhouse gases
- Higher repair costs
- Higher insurance rates, depending on make, model, and configuration
- Varying costs at the pump, depending on state, city, and county
Source: Car & Driver, Perch Energy, AutoWeek
“This means your fleet is younger. It’s safer. It’s better for the environment.”
Representative Dave Taylor, Republican, from Ohio, who introduced the original House version, said the Senate narrowed the bill.
“It started out with including new and used cars,” he said.
“That’s important for my district because it’s one of the poorest districts in Ohio.”
Taylor said the change limits the help for people who tend to buy used vehicles, about 75% of all buyers.
“Hopefully, that’s a change we can make down the road,” he added.
“But for now, it’s a great step forward.”
WHAT ABOUT POOR PEOPLE?
The law may not help lower-income buyers as much as expected, since 80% of cars under $30,000 are imported and won’t qualify.
Still, for those eligible, the deduction could cut deep into interest payments.
Data from Kelley Blue Book put the average new car price at $47,962 in March 2025.
Experian said the average new car loan rate was 6.73%, which adds up to over $8,600 in interest across five years.
That’s about $144 a month – money buyers could now write off, if they check all six boxes.
Moreno said the change would also help phase out the Biden-era $7,500 tax break on electric vehicles.
“We’re giving relief to working families, working Americans,” he said.
“That equals, by the way, almost an exact $7,500.”
But not everyone agrees it will offset price hikes triggered by rising tariffs.
A study from the Institute on Taxation and Economic Policy warned prices could still rise overall.
It found that if tariffs push vehicle prices up by just 5%, a $40,000 car could cost from $1,087 to $1,778 more, even with the new tax break.
