Key insights
- A new tax credit in 2025 allows taxpayers to deduct up to $10,000 of car loan interest for new vehicles assembled in the US. This aims to offset rising car prices due to supply chain issues and tariffs, potentially boosting demand for domestically manufactured vehicles and supporting consumer spending in the auto sector. The credit's impact on equity markets is mildly positive, favoring US auto manufacturers.
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If you purchased a new car in 2025, you may be able to deduct part of your loan payment from your taxes.
A new tax credit in the "One Big, Beautiful Bill" allows taxpayers to deduct part of the interest paid on a car loan from their 2025 taxes. Taxpayers can subtract up to $10,000 from their taxable income, reducing the amount they owe.
However, only car loans for new vehicles that underwent final assembly in the United States qualify. In 2025, about 30% of the vehicle models for sale in the U.S. finished assembly in the country, according to a report by the National Highway Traffic Safety Administration.
Taxpayers can use the National Highway Traffic Safety Administration's VIN Decoder to find out where a car was finally assembled. The vehicle identification number, VIN, is a 17-character number that can typically be found on the driver's side of the car's dashboard or side door. The VIN can also be found on the vehicle's insurance card or title, and the number must be included when taxpayers claim the car loan interest deduction.
Car prices have been steadily rising since the COVID-19 pandemic interrupted supply chains, and recent tariffs on vehicles and auto parts have made it more expensive to manufacture cars. This deduction can help more Americans afford their car loan payments—and it promotes buying from United States factories.
Here are some of the other requirements for the vehicle loan:
Here are some of the requirements for the taxpayer: