Are You Eligible for Trump's Auto Loan Deduction? Here's Who Qualifies
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A recent IRS fact sheet broke down the key vehicle, taxpayer and loan requirements for this new deduction. Whether you recently bought a vehicle or are looking for one, find out how to qualify and how much your potential tax savings could be.
Does Your Vehicle Qualify?
This deduction applies only if your new (not used) vehicle meets all of these rules:
It was assembled at the final stage at a U.S. plant.
Its gross weight is below 14,000 pounds.
It has two or more wheels and is suitable for driving on public roads.
It doesn't have a salvage title.
It's an eligible vehicle type, such as a motorcycle, SUV, car, pickup truck or van.
Eligible makes and models vary. As of April 2025, CarEdge listed 117 American-made vehicles from makers such as Chevrolet, Tesla, Nissan, Ford, Volkswagen, Hyundai, Mazda, Jeep, Honda, GMC, Toyota and Volvo. Since the final assembly location is what matters, even international brands can qualify.
If you're shopping for a car, you can ask local dealerships, many of which are already advertising the deduction, or you can research U.S.-manufactured options online. The United Auto Workers website also noted that a U.S.-manufactured vehicle will have a vehicle identification number (VIN) that begins with the digit 1, 4 or 5.
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What Are the Taxpayer Rules?
Similar to the student loan interest deduction, the new auto loan interest deduction is available whether you itemize or take the standard deduction, and you can't exceed the modified adjusted gross income (MAGI) limit for your filing status.
To get the maximum auto loan interest deduction, your MAGI can't be above $200,000 if you're a joint filer or $100,000 if you use another filing status. According to the bill's text, there's still a partial deduction with a MAGI of up to $250,000 for joint filers and $150,000 for other filers; the reduction is $200 per $1,000 of your MAGI exceeding the base threshold.
What Are the Financing Rules?
Even if you meet the taxpayer and vehicle rules, you'll need to make sure your loan qualifies. Specifically, you must have taken out your loan after December 31, 2024, and it must be a personal vehicle loan where you used the vehicle as collateral.
So, if your family gave you a loan to buy an eligible car or you got an unsecured personal loan from the bank, you can't deduct the interest. The same is true if you took out a loan to buy a vehicle for commercial use, leased the car or financed a vehicle you planned to use for parts.
If you financed or leased a business vehicle, you might qualify for a different tax break via a business expense deduction. You can get the details in IRS Publication 463.
How Big Could Your Deduction Be?
If you're eligible for this deduction, your potential tax savings will depend on your tax bracket, the amount of auto loan interest you paid and your MAGI. Keep in mind that the deduction lowers your taxable income and isn't a credit that directly lowers your tax liability.
For example, if you pay the maximum $10,000 in annual auto loan interest, have a MAGI low enough for the full deduction and fall in the 22% tax bracket, you could save $2,200 that year. But the most someone in the 10% tax bracket could save is $1,000. CBS News noted that you'll likely see smaller deductions after the first year due to how banks frontload interest.
You may also qualify for extra savings of up to $7,500 if your new vehicle is eligible for the federal EV credit. While the 'One Big Beautiful Bill' cut this tax perk, it remains available for eligible vehicles bought through September 2025.
How To Claim the Deduction
The IRS has provided few details so far on reporting auto loan interest on your next tax return, but it noted that you will have to provide your vehicle's VIN. You can also expect your auto lender to send a tax document showing the interest paid. The IRS should provide more details closer to tax season.
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This article originally appeared on GOBankingRates.com: Are You Eligible for Trump's Auto Loan Deduction? Here's Who Qualifies
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