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Miami Herald
18-07-2025
- Automotive
- Miami Herald
Trump's auto loan tax break could save working class buyers thousands, experts say
WASHINGTON - A Trump-backed tax holiday on auto loan interest payments could save middle-class Americans several hundred dollars apiece on new U.S.-built vehicle purchases through 2028, according to industry experts. The break comes via a provision in the Republicans' One Big Beautiful Bill Act, a massive tax cut and spending package signed into law by President Donald Trump on July 4. "Auto buyers got an above-the-line tax deduction. That's a rare beast in the zoo of tax policies," economist Patrick Anderson said. He also called it a "sharp U-turn in auto tax policy" from the Biden era, which featured electric vehicle credits used by more affluent customers. There are strings attached to the provision, so not all customers and not all vehicles will qualify. But automakers and analysts alike have cheered the policy change as one that will benefit the working class and nudge buyers toward built-in-America vehicles. "For the subset of taxpayers that are employed, earn between $50,000 and $100,000 in salary, and are ready to buy a new car, this could reduce their cost by between $300 and $900 per year, and for heavy borrowers, over $1,000 per year," Anderson's firm, the Lansing, Michigan-based Anderson Economic Group, wrote in an analysis of the new policy. A separate analysis by automotive and industrial consultancy AlixPartners estimated similar benefits of up to $800 in each of the first and second years of auto loans when interest payments are highest, with total savings of approximately $3,000 over the full term of a given loan. The analysis also suggested that about 1.8 million borrowers per year could benefit. "While the auto-loan interest deduction for domestically produced vehicles would of course benefit consumers directly, this measure could help out automakers and dealers as well - if it nudges affordability upward and helps sustain demand. The proof, as always tough, will be in the final pudding," said Akshay Baliga, a director in the automotive and industrial practice at AlixPartners. Trump promised the auto loan tax break on the campaign trail last year, including during a speech to the Detroit Economic Club in October. At the time, he said the tax policy would help both automakers and consumers dealing with high prices across an industry that was "going out of business." Since then, Michigan U.S. Rep. Bill Huizenga, a Republican, has been a champion of the policy in Congress. He introduced a bill on the topic in May titled the "Made in America Motors Act," which was later folded into the Republicans' broader budget package. "Thanks to the No Tax on Auto Loan Interest included in the One Big Beautiful Bill, millions of Americans will find it more affordable to finance the purchase of a new car, minivan, truck, or SUV that is assembled in the United States," Huizenga said in an emailed statement. He added: "By reducing the federal tax burden by up to $10,000, this provision provides substantial relief to hardworking Americans, not just here in Michigan but across the nation, who have suffered from years of Bidenflation. Importantly, this provision will also spur on Michigan's automotive sector and strengthen the good-paying jobs it supports across our state." The White House has given the auto loan tax break top billing in promoting the legislative package, touting it in social media posts alongside wider-reaching "no tax on tips" and "no tax on overtime" policies. The average MSRP of a new vehicle in June was $51,124, according to Kelley Blue Book. That is the second-highest on record behind December 2024 ($51,990). Policy basics The provision applies "above the line," meaning that eligible tax filers will be able to take advantage of the break, even if they claim the widely used standard deduction on their annual federal submission. Individuals earning less than $100,000 in modified adjusted gross income and couples earning less than $200,000 can get the full benefit of the tax break, but it gradually phases out for higher-income filers. Anderson advised potential buyers to confirm their MAGI before making a purchase, since it tends to be higher than the more commonly known AGI. The Internal Revenue Service explains the difference on its website. The economist also advised buyers to double-check with dealers on where vehicles were assembled, since manufacturers often have different assembly locations for different trims of the same model. For anyone under the income cap looking to use the new deduction, the following basic requirements apply: -Purchases made in 2025 (including before July 4), 2026, 2027 and 2028 -No leases -Final vehicle assembly completed in the United States -Vehicle is either a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle made for use on public streets -Vehicle weight below 14,000 pounds -Vehicle is new and for personal use -Loan made by unrelated parties (no family loans) The policy allows annual deductions of up to $10,000, though few filers are likely to claim deductions that high. The deduction provides no benefit for cash-rich buyers who pay off their vehicle in full upon purchase, and limited benefit to buyers who agree to low-APR financing deals with minimal interest accruing. The average interest rate on auto loans for borrowers with good to excellent credit (670 to 850 credit score) ranged from 5.18% to 6.70% in the first quarter of 2025, according to NerdWallet. For borrowers with nonprime or subprime credit (501-660), rates typically fall between 9.83% and 13.22%. Those rates could rise and fall depending on the length of a loan, with shorter loans drawing lower rates and longer ones drawing higher ones. The most common auto loans are between five and seven years. In practical terms, auto borrowers with strong credit who opt to buy a $30,000 vehicle, make a 20% down payment, and accept a 72-month loan would likely face annual interest payments between $1,200 and $1,700 for the first year of their loan. They could deduct a portion of that from their taxes and expect savings in the range of $140 and $360, depending on their federal income tax bracket. A borrower with weaker but still fair credit participating in a similar transaction would save in the range of $290 to $710, though savings in all cases vary depending on a combination of vehicle price, down payment, loan terms and income. Who benefits most? Anderson said that the "sweet spot" for the new tax policy is "younger workers buying a first or second car, working families that need a family-hauler, and trade workers that need lower-trim trucks for their personal use." His analysis included more than two dozen domestically assembled models that will likely benefit from the deduction, with several from Ford Motor Co., General Motors Co. and Stellantis NV. Those models include the Ford Bronco, Escape and lower-trim F-150s; Chevrolet Traverse, Colorado and lower-trim Silverado; and the Jeep Wrangler and Cherokee. Anderson doubted that the luxury market would see much benefit, since buyers in that segment tend to have higher incomes. He also noted that lower- and medium-income buyers who choose to go into debt to purchase expensive cars will be able to deduct "substantial" interest, though their budgets will take a hit in the process. A full list of eligible vehicles, Anderson predicted, will eventually be published by the IRS. Ivan Drury, the director of insights for Edmunds, said the policy will most benefit buyers with poor credit who need to accept higher interest rates to get an auto loan. Drury also predicted that some buyers might choose to put less money down at the time of purchase or opt into extended warranties or maintenance packages, knowing that they are in line for a tax break at the end of the year. "I think for the dealership, this is very beneficial when someone is financing," he said. "It's another leverage point for a dealership to make things more enticing once you're already in there." He also said the benefit is strong for consumers: "It's almost like, is it too good to be true? When you're paying interest, you're just paying the bank, right? You're not getting more car. Nobody wants to pay for the right to borrow." Industry reaction Drury called the new policy a welcome change for consumers but said it is unlikely to be a "volume buster" that supercharges auto sales. "Is it going to make or break the numbers for an OEM or a dealership? Unlikely," he said. "But it will make consumers feel less sting when they see current interest rates, especially people who've been out of the market for over six years, which is the average age for trading a vehicle in for a new car." Anderson's analysis also noted that the new deduction could help offset price increases from Trump's 25% tariffs on imported auto parts. Several automakers and dealers have cheered the new tax break, including Ford Motor Co., which assembled about 80% of its vehicles in the United States last year. "Customers can rest easy knowing America's best-selling trucks, the F-Series, are all assembled in America and qualify for this deduction," company spokesperson Robyn Jackson said in a statement. "As America's top auto producer, we're glad to see Congress and the Trump administration create policies that lower costs for customers and support the American auto industry at the same time." General Motors Co., which built about half of its vehicles in the United States, also celebrated the move. The manufacturer has launched dedicated landing pages for the tax breaks across its Chevy, GMC and Cadillac websites. "GM and its brands have been the engine of growth for the US auto industry this year, and we don't see that changing," company spokesperson Elizabeth Winter said in a statement. Stellantis NV and the Alliance for Automotive Innovation, the industry's top lobbying group, declined to comment. The United Auto Workers did not immediately respond to a request for comment Thursday. The National Auto Dealers Association suggested the policy might nudge sales upward with average new vehicle prices close to all-time highs. "The new provision allowing qualifying car buyers to deduct auto loan interest is designed to help offset some costs and make certain vehicles more affordable. As a result, it is expected to help stimulate car sales for the industry," spokesperson Amy Wright said. Walt Tutak, the dealer trade inventory manager at Matthews-Hargreaves Chevrolet in Royal Oak, said the tax break was "a great thing" but did not expect it to boost sales significantly. Tutak noted that his dealership leases about 70% of new vehicles, transactions that are not covered by the new policy. He suggested that some buyers might switch to purchasing because of their ability to deduct loan interest but expected the impact to be marginal. "If you have to buy a car, you're going to buy it one way or the other," Tutak said in a phone interview. "I might be wrong, but I don't think it's gonna make any more sales. It's just gonna help the consumer." Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
USA Today
08-06-2025
- Politics
- USA Today
Whitmer says she won't run for president. Democrats better hope she's joking.
For nearly as long as she's been governor, Gretchen Whitmer has been considered a presidential hopeful. And for nearly as long as she's been considered a presidential hopeful, Michigan's governor has been telling anybody who'd listen that she's actually not. When an interviewer at a Detroit Economic Club forum in April asked Whitmer what she's looking forward to in 2026, when she's term-limited out of office, the governor didn't miss a beat: "Retiring." Democrats better hope Whitmer was joking, because she may be the party's best hope of reclaiming the White House in 2028. Why Whitmer and not Buttigieg, Shapiro or Beshear? We could talk here about the other guys likely to seek the 2028 Democratic presidential nomination, a list that includes, at minimum: Need a break? Play the USA TODAY Daily Crossword Puzzle. Former Secretary of Transportation Pete Buttigieg California Gov. Gavin Newsom Illinois Gov. JB Pritzker Pennsylvania Gov. Josh Shapiro Colorado Gov. Jared Polis Kentucky Gov. Andy Beshear And it will surely grow over the next three years. But I think it's a better idea to talk about Whitmer. She's a successful purple-state governor (a recent Impact Research poll puts her approval rating at a whopping 63%) with decades of legislative, policymaking and executive experience. She speaks with intelligence and sensitivity on subjects from manufacturing to motherhood. She's got a knack for focusing on substantive issues that offer common ground, like funding our schools and fixing our roads. At 53, she's youthful and energetic ‒ but seasoned and experienced ‒ in a party with a surfeit of octogenarians, and she's a woman in a party whose voters, at times, seem disinclined toward white male candidates, at least at the state and congressional levels. Whitmer is an effective advocate for the causes she champions, and, as a mom who seemed to effortlessly balance raising two daughters, now grown, and leading the 10th most populous state in the nation, she's an aspirational figure for thousands of Michigan women who can't remember if they put money in their kid's school lunch account. (OK, it's me. I'm Michigan women.) Whitmer was elected and reelected by wide margins, and her approval rating has never dipped below 50%, which is, in these sorry times, a real achievement. "She is a superb retail politician, and a really unique one," said pollster Richard Czuba of the Glengariff Group. "You watch her work a rope line, and she makes everyone feel seen. And she comes from a state that's a must-win for a Democrat." American voters like centrists – and Whitmer does what voters expect There's no denying that her willingness to work with President Donald Trump has disappointed some Democrats who would prefer blanket opposition to hopeful collaboration. That centrist thing, Czuba said, is really only a problem for the far flanks of both parties ‒ and they're not the swing voters who decide elections, in Michigan or in the United States. "We did this question last year: Should an elected official cross party lines and negotiate with the other party to get something done, or should elected officials stick to the party's position and stand up for it?" said Czuba, of a survey of likely voters for the Detroit Regional Chamber ahead of the 2024 Mackinac Policy Conference. "It was 70% to 19%." The 19%, he said, were on the far right and the far left. "She's doing exactly what most voters expect of their leaders," Czuba said. "The governor understands the middle in a way that few people understand independent, centrist voters. That's one of her strengths. She pays attention to the center. In a purple state like Michigan, if you don't, you lose. That's how Democrats can win nationally. "They need to pay attention to the center, because if you don't, you lose." Gretchen Whitmer doesn't start fights, but she can finish them This is who Whitmer has always been. Her political sensibility is best described as "cheerfully determined,' and if there were an Olympic event in keeping your cool, this lady would hold the gold medal. As late as January 2018, powerful Democratic men – including Detroit Mayor Mike Duggan – were working to replace Whitmer on the Democratic gubernatorial ballot. Her response? "I'm staying focused on running a campaign that can win, so we can get Michigan back to being a state our kids will stay in when they graduate," Whitmer told me that year. "I'm eager to build the coalition. … I'm eager to work with anyone who wants to solve problems." In 2019, when then-Senate Majority Leader Mike Shirkey, a Republican, called her "batshit crazy" to a crowd of supporters, or said in 2021 that he and the GOP legislature had "spanked" Whitmer "hard" on the budget and appointments, the governor wasn't mad, just disappointed: "I think that we deserve better, frankly, but I'm not going to spend my energy there because I've got a lot of important things that I'm working on that the people of our state need us to be all-successful on." In her most recent State of the State address, with Republicans back at the helm of the House of Representatives, Whitmer stayed on collaborative message: 'I took an oath to serve the people of Michigan ‒ all the people. That's my commitment to you no matter who is in the White House or on the other side of the table in Lansing. Yes, I do hope to find common ground with President Trump and work with the Democratic Senate and Republican House on our shared priorities.' Whitmer doesn't start fights, but she's not a pushover. During the COVID-19 pandemic, she went toe-to-toe with Trump, who dubbed her "that woman from Michigan," and in 2022 she led the charge to enshrine reproductive rights in the state constitution after Roe v. Wade was overturned. She's a staunch supporter of civil rights, women's rights and LBGTQ+ rights, and she has made it clear that won't change. What does Whitmer's 'folder incident' at the White House mean? The Econ Club interview last month came on the heels of a rough week for Michigan's governor. A meeting with Trump, set to discuss a new fighter mission for Selfridge Air Force Base and invasive Asian carp in the Great Lakes, had taken a turn: After exchanging pleasant remarks with Whitmer and Michigan's Republican House Speaker Matt Hall, a wave of cameras poured into the Oval Office as Trump signed two executive orders authorizing politically motivated investigations of staffers who served in his first term. An uncomfortable Whitmer edged away from the action, at one point holding a folder in front of her face as a photographer snapped a picture. The image, published on April 12 by The New York Times, reverberated through the political world. ("What was going through my mind at that moment?" she said to the Econ Club interviewer. "'I don't want my picture taken.'") I got dozens of texts the day the picture published, mostly from political insiders who saw The Folder Incident as Whitmer's Howard Dean scream. (Which, of course, is not actually what ended 2004 candidate Dean's presidential ambitions ... but we're still talking about it, 21 years later.) As the story unfolded, some of the Democratic insiders and national pundits who had been enamored with the notion of Whitmer as a presidential contender soured on the governor. The honeymoon, it seemed, was over. I didn't feel so great about The Folder Incident myself. It was unpleasant to watch a strong female governor treated that way, and the image, I thought, would reverberate. But outside the political bubble, it was a different story. When I floated the suggestion that this might tank Whitmer's presidential future past a friend who's not knee-deep in politics, my friend was skeptical. "Hmm. I guess we'll see. The 2028 election is a long way away," she said. "Some people will just see it as, 'I have nothing to do with this.'" My friend isn't alone. In an Epic-MRA poll conducted between April 28 through May 3 – after the Oval Office meeting – 52% of Michiganders said they approved of Whitmer's performance as governor, consistent with previous polls. In the same survey, just 41% said the same of Trump. A few weeks later, that new fighter mission at Selfridge Whitmer went to the White House to discuss – it happened. Democrats need to reconnect with voters Most folks in jobs like mine have responded to Whitmer's repeated assertions that she's into the job she has, not the one everyone thinks she wants, with mild eye-rolling to outright scoffing. But I believe her. When Whitmer says she's not running in 2028, it doesn't sound coy. It's been a punishing seven years, complete with a pandemic and a murder/kidnapping plot that an astounding number of people somehow see as a punchline or a put-up, and it's easy to imagine that she's ready for a break. Still, if I were a Democratic strategist, I'd be wondering whether I could persuade Whitmer to change her mind. Democrats want to win, but winning elections isn't just about numbers on the board. Voters are people, people whose lives are affected by who sits in the governor's mansion, or in the Oval Office. What Democrats need is to reconnect with voters, and Whitmer is among the few Democrats willing – or able – to give the party what it needs. Nancy Kaffer is the editorial page editor of the Detroit Free Press, where this column originally appeared. Contact her atnkaffer@
Yahoo
03-06-2025
- Automotive
- Yahoo
Proposed new auto loan tax deduction could help buyers get break on interest
If taxpayers actually end up seeing a new, proposed tax break on the interest borrowers pay on car loans, at least some can claim it all started in the Motor City. President Donald Trump, who was running for his second term last year, dropped that car loan bombshell during his comments at the Detroit Economic Club on Oct. 10, 2024, less than a month before the presidential election. Trump said then that he planned to propose making interest on car loans fully deductible. Now, we're getting more of the details for what such a deduction could look like based on what was tucked into the broad tax plan released by House Republicans on May 12. The White House calls the proposed legislation "One, big, beautiful bill." If you're looking to buy one, big, beautiful SUV or truck or car, pay attention to the haggling in Washington to see whether a new deduction on car loans will become a reality. The good news: The GOP bill calls for an above-the-line deduction of up to $10,000 in car loan interest during a given taxable year. You'd pay no tax on that interest, if you qualified. Creating an above-the-line deduction means that the proposed tax break on car loan interest would not just apply to the roughly 10% of taxpayers who itemize deductions. It also would apply to the vast majority of people who do not itemize and instead claim the standard deduction. The standard deduction became far more prevalent after the major tax changes in the Tax Cuts and Jobs Act of 2017 — the Trump tax cut initiative that expires at the end of 2025. Trump is seeking to extend those tax cuts that are set to expire later this year. The so-so news: All new car and truck buyers who take out a car loan won't qualify for the deduction. Much will depend on your income — and the car or truck that you buy. Under the plan, House Republicans are calling for making the auto loan interest deduction limited to $10,000. But the deduction would phase out by $200 for every $1,000 of modified adjusted gross income above $100,000 for single filers and $200,000 for joint filers, according to an analysis by the Tax Foundation, a nonprofit research organization. As a result, a single person with $149,001 in income or more would not receive any deduction, according to Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting in Riverwoods, Illinois. The deduction phases out entirely, based on his calculations, for a married couple making $249,001 or more. More personal finance: Restart of student debt collections expected to trigger more student loan scams The auto loan interest deduction would be temporary under the GOP plan, and it would apply to auto loans that are taken out in 2025, 2026, 2027 and 2028. If you took out a five-year car loan in 2027, for example, you could only expect two years for a deduction on your car loan interest to apply at this point. The wording of the bill indicates that you would only get the deduction for those specified four years, Luscombe said. Again, the tax rule has yet to be approved, so don't bank on that tax deduction just yet. We're talking about a tax break for buyers of qualified passenger vehicles that are "manufactured primarily for use on public streets, roads, and highways," according to the House Ways and Means Committee section-by-section breakdown of the bill. The vehicle could be a car, minivan, van, sport utility vehicle, pickup truck or even a motorcycle. An applicable passenger vehicle for the tax break also would include all-terrain vehicles and recreational vehicles, if their final assembly took place in the United States. The tax break would apply only to auto loans that were taken out to buy cars or trucks that have their final assembly in the United States. It's debatable at this point whether the tax break would apply to both new car loans, as well as used car loans. The language in a Ways and Means Committee states: "No tax on car loan interest." It does not specify if that applies only to car loans taken out by a consumer to buy a new car. It also does not state whether a car loan for buying a used car would apply. Luscombe said it's not clear what the odds are yet for Congress to pass a car loan deduction or even a deduction with the same rules outlined in the Ways and Means bill. Bills were introduced in both the House and the Senate that focused on the auto loan interest deduction. Detroit Free Press Washington correspondent Todd Spangler reported about one bill by U.S. Rep. Bill Huizenga, which is dubbed the "Made in America Motors Act." Huizenga, R-Holland Township, introduced that legislation May 7, which would allow a deduction of up to $2,500 in a given year for interest paid on a loan to buy a motor vehicle if it was built in the United States. The differences in various bills are likely to emerge and be debated in the coming weeks. "Any provision is likely to be weighed in terms of its impact on the overall budget numbers in trying to make the overall bill meet the budget requirements," Luscombe said. A key point to understand: Your entire monthly car payment would not be fully deductible. If you're paying $834 a month for your car loan, you're not looking at a $10,000 a year deduction. Jonathan Smoke, chief economist for Cox Automotive, said consumers need to understand that car loans are amortized so that each payment covers interest and principal. You're not paying the same amount of interest each year on your car loan. More of your payment goes to cover interest, Smoke said, in the first years of the loan. Therefore, the maximum tax deduction would be in year one and then it would get smaller in future years. Let's assume an interest rate of 9.5% on a six-year car loan. On a $42,000 car loan in this example, the borrower would pay $768 a month. The first year of interest would add up to a bit more than $3,750 in this example. For someone at a tax rate of 24%, that deduction would reduce taxes by roughly $900. But it's important to note that the deduction would decline in subsequent years of that car loan. It's also key to note the dollar value of the deduction would be bigger for someone who makes more money and pays a higher tax rate. It would be smaller for someone who earns less money and pays a lower tax rate. Ivan Drury, director of insights at Edmunds, said interest over the life of a loan is often overlooked as consumers become focused on monthly payment. Interest rates have hovered around 7% for the last two years, he said, and the amount financed has been at or slightly above $40,000. As a result, consumers are paying nearly double the amount of interest that they had in previous years. "While a tax deduction won't wash away all of the increased costs associated with purchasing a new car in today's age, it will certainly dull the edge," Drury said. If the legislation is approved by Congress, consumers would need to pay attention to the interest rate they're paying, Drury said, especially since this deduction wouldn't be available across the board or even on some models where different trim levels are assembled outside of the United States. Another obvious but essential point: You'd need to qualify for a car loan to be able to take advantage of this tax break. Increasingly, experts warn more consumers are experiencing financial fragility, struggling to manage their money and their debt. Many consumers now expect that it will be far tougher to find an affordable car loan and many fear rejections in obtaining credit, according to a survey related to credit access by the Federal Reserve Bank of New York. The survey takes into account what it calls "discouraged borrowers" or those respondents who stated they did not apply for any credit in the past 12 months because they did not think they would get approved, despite reporting a need to borrow. Those discouraged borrowers reached 8.5% in the February survey, the highest level since the start of the survey in October 2013. For auto loan applications, the survey noted, the average perceived probability of a rejection reached 33.5%, the highest level since the start of the series. Cox Automotive's research indicated that consumers saw credit access dip in April, particularly for those with lower credit scores. "Lenders were more cautious about extending credit to higher-risk borrowers," according to Cox Automotive. A variety of issues could dampen someone's ability to buy a car this year or next — loss of a job, fear of losing a job, a credit score that was dinged in 2025 by nonpayment of student loans. Credit scores for student loan borrowers started getting hit again this year, as delinquencies resumed appearing on credit scores. High car prices and high interest rates on car loans are another issue that can cause someone to put off buying a car or truck. Higher tariffs on many cars will drive up prices, too. Ford Motor Co., for example, raised prices in May on the Mustang Mach-E electric SUV, Maverick pickup and Bronco Sport, which are built in Mexico. Prices increased by as much as $2,000 on some models, as first reported by Reuters. In addition, many drivers owe more than their current car is worth, given the high prices they paid during the pandemic and used car values now, cutting into the potential trade-in value. The expectation is that U.S. car and light truck sales will fall behind last year's red-hot run when it comes to sales in 2025, 2026 and 2027, according to a forecast issued in May by University of Michigan economists. Right now, U-M economists expect U.S. passenger vehicle sales to drop sharply later this year, from an annual pace of 16.4 million in the first quarter of 2025 to 14.8 million in the third quarter once the tariffs on vehicle imports drive up prices for new cars and trucks. So, a tax break on the interest you pay each year on your car loan certainly could rev up an industry facing plenty of challenges. Free Press Washington correspondent Todd Spangler contributed to this report. Contact personal finance columnist Susan Tompor: stompor@ Follow her on X @tompor. This article originally appeared on Detroit Free Press: Proposed car loan interest tax deduction: Who would qualify
USA Today
03-06-2025
- Automotive
- USA Today
Proposed new auto loan tax deduction could help buyers get break on interest
Proposed new auto loan tax deduction could help buyers get break on interest Show Caption Hide Caption How Trump's tariffs will effect everyday prices With new tariffs on imports, several everyday goods are likely to become more expensive for American consumers. Cars and auto parts, many of which are produced through an integrated North American supply chain, will see price increases as manufacturers adjust to higher costs. unbranded - Newsworthy The sweeping GOP tax bill calls for an above-the-line deduction of up to $10,000 in car loan interest during a given taxable year. You'd pay no tax on that interest, if you qualified. The proposed tax deduction aims to drive sales of U.S.-built cars and trucks, fulfilling a campaign promise made in Detroit by President Donald Trump. If taxpayers actually end up seeing a new, proposed tax break on the interest borrowers pay on car loans, at least some can claim it all started in the Motor City. President Donald Trump, who was running for his second term last year, dropped that car loan bombshell during his comments at the Detroit Economic Club on Oct. 10, 2024, less than a month before the presidential election. Trump said then that he planned to propose making interest on car loans fully deductible. Now, we're getting more of the details for what such a deduction could look like based on what was tucked into the broad tax plan released by House Republicans on May 12. The White House calls the proposed legislation "One, big, beautiful bill." If you're looking to buy one, big, beautiful SUV or truck or car, pay attention to the haggling in Washington to see whether a new deduction on car loans will become a reality. How big or beautiful that car loan deduction would be The good news: The GOP bill calls for an above-the-line deduction of up to $10,000 in car loan interest during a given taxable year. You'd pay no tax on that interest, if you qualified. Creating an above-the-line deduction means that the proposed tax break on car loan interest would not just apply to the roughly 10% of taxpayers who itemize deductions. It also would apply to the vast majority of people who do not itemize and instead claim the standard deduction. The standard deduction became far more prevalent after the major tax changes in the Tax Cuts and Jobs Act of 2017 — the Trump tax cut initiative that expires at the end of 2025. Trump is seeking to extend those tax cuts that are set to expire later this year. The so-so news: All new car and truck buyers who take out a car loan won't qualify for the deduction. Much will depend on your income — and the car or truck that you buy. Take a look under the hood of this tax break Under the plan, House Republicans are calling for making the auto loan interest deduction limited to $10,000. But the deduction would phase out by $200 for every $1,000 of modified adjusted gross income above $100,000 for single filers and $200,000 for joint filers, according to an analysis by the Tax Foundation, a nonprofit research organization. As a result, a single person with $149,001 in income or more would not receive any deduction, according to Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting in Riverwoods, Illinois. The deduction phases out entirely, based on his calculations, for a married couple making $249,001 or more. More personal finance: Restart of student debt collections expected to trigger more student loan scams The auto loan interest deduction would be temporary under the GOP plan, and it would apply to auto loans that are taken out in 2025, 2026, 2027 and 2028. If you took out a five-year car loan in 2027, for example, you could only expect two years for a deduction on your car loan interest to apply at this point. The wording of the bill indicates that you would only get the deduction for those specified four years, Luscombe said. Again, the tax rule has yet to be approved, so don't bank on that tax deduction just yet. We're talking about a tax break for buyers of qualified passenger vehicles that are "manufactured primarily for use on public streets, roads, and highways," according to the House Ways and Means Committee section-by-section breakdown of the bill. The vehicle could be a car, minivan, van, sport utility vehicle, pickup truck or even a motorcycle. An applicable passenger vehicle for the tax break also would include all-terrain vehicles and recreational vehicles, if their final assembly took place in the United States. The tax break would apply only to auto loans that were taken out to buy cars or trucks that have their final assembly in the United States. It's debatable at this point whether the tax break would apply to both new car loans, as well as used car loans. The language in a Ways and Means Committee states: "No tax on car loan interest." It does not specify if that applies only to car loans taken out by a consumer to buy a new car. It also does not state whether a car loan for buying a used car would apply. Luscombe said it's not clear what the odds are yet for Congress to pass a car loan deduction or even a deduction with the same rules outlined in the Ways and Means bill. Bills were introduced in both the House and the Senate that focused on the auto loan interest deduction. Detroit Free Press Washington correspondent Todd Spangler reported about one bill by U.S. Rep. Bill Huizenga, which is dubbed the "Made in America Motors Act." Huizenga, R-Holland Township, introduced that legislation May 7, which would allow a deduction of up to $2,500 in a given year for interest paid on a loan to buy a motor vehicle if it was built in the United States. The differences in various bills are likely to emerge and be debated in the coming weeks. "Any provision is likely to be weighed in terms of its impact on the overall budget numbers in trying to make the overall bill meet the budget requirements," Luscombe said. Your entire car payment wouldn't be deductible A key point to understand: Your entire monthly car payment would not be fully deductible. If you're paying $834 a month for your car loan, you're not looking at a $10,000 a year deduction. Jonathan Smoke, chief economist for Cox Automotive, said consumers need to understand that car loans are amortized so that each payment covers interest and principal. You're not paying the same amount of interest each year on your car loan. More of your payment goes to cover interest, Smoke said, in the first years of the loan. Therefore, the maximum tax deduction would be in year one and then it would get smaller in future years. Let's assume an interest rate of 9.5% on a six-year car loan. On a $42,000 car loan in this example, the borrower would pay $768 a month. The first year of interest would add up to a bit more than $3,750 in this example. For someone at a tax rate of 24%, that deduction would reduce taxes by roughly $900. But it's important to note that the deduction would decline in subsequent years of that car loan. It's also key to note the dollar value of the deduction would be bigger for someone who makes more money and pays a higher tax rate. It would be smaller for someone who earns less money and pays a lower tax rate. Ivan Drury, director of insights at Edmunds, said interest over the life of a loan is often overlooked as consumers become focused on monthly payment. Interest rates have hovered around 7% for the last two years, he said, and the amount financed has been at or slightly above $40,000. As a result, consumers are paying nearly double the amount of interest that they had in previous years. "While a tax deduction won't wash away all of the increased costs associated with purchasing a new car in today's age, it will certainly dull the edge," Drury said. If the legislation is approved by Congress, consumers would need to pay attention to the interest rate they're paying, Drury said, especially since this deduction wouldn't be available across the board or even on some models where different trim levels are assembled outside of the United States. Finding and qualifying for an affordable car loan Another obvious but essential point: You'd need to qualify for a car loan to be able to take advantage of this tax break. Increasingly, experts warn more consumers are experiencing financial fragility, struggling to manage their money and their debt. Many consumers now expect that it will be far tougher to find an affordable car loan and many fear rejections in obtaining credit, according to a survey related to credit access by the Federal Reserve Bank of New York. The survey takes into account what it calls "discouraged borrowers" or those respondents who stated they did not apply for any credit in the past 12 months because they did not think they would get approved, despite reporting a need to borrow. Those discouraged borrowers reached 8.5% in the February survey, the highest level since the start of the survey in October 2013. For auto loan applications, the survey noted, the average perceived probability of a rejection reached 33.5%, the highest level since the start of the series. Cox Automotive's research indicated that consumers saw credit access dip in April, particularly for those with lower credit scores. "Lenders were more cautious about extending credit to higher-risk borrowers," according to Cox Automotive. A variety of issues could dampen someone's ability to buy a car this year or next — loss of a job, fear of losing a job, a credit score that was dinged in 2025 by nonpayment of student loans. Credit scores for student loan borrowers started getting hit again this year, as delinquencies resumed appearing on credit scores. High car prices and high interest rates on car loans are another issue that can cause someone to put off buying a car or truck. Higher tariffs on many cars will drive up prices, too. Ford Motor Co., for example, raised prices in May on the Mustang Mach-E electric SUV, Maverick pickup and Bronco Sport, which are built in Mexico. Prices increased by as much as $2,000 on some models, as first reported by Reuters. In addition, many drivers owe more than their current car is worth, given the high prices they paid during the pandemic and used car values now, cutting into the potential trade-in value. The expectation is that U.S. car and light truck sales will fall behind last year's red-hot run when it comes to sales in 2025, 2026 and 2027, according to a forecast issued in May by University of Michigan economists. Right now, U-M economists expect U.S. passenger vehicle sales to drop sharply later this year, from an annual pace of 16.4 million in the first quarter of 2025 to 14.8 million in the third quarter once the tariffs on vehicle imports drive up prices for new cars and trucks. So, a tax break on the interest you pay each year on your car loan certainly could rev up an industry facing plenty of challenges. Free Press Washington correspondent Todd Spangler contributed to this report. Contact personal finance columnist Susan Tompor: stompor@ Follow her on X @tompor.
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28-05-2025
- Business
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Democrats better hope Michigan Gov. Whitmer changes her mind about presidential run
For nearly as long as she's been governor, Gretchen Whitmer has been considered a presidential hopeful. And for nearly as long as she's been considered a presidential hopeful, Michigan's governor has been telling anybody who'd listen that she's actually not. When an interviewer at a Detroit Economic Club forum last month asked Whitmer what she's looking forward to in 2026, when she's term-limited out of office, the governor didn't miss a beat: "Retiring," she replied. Democrats better hope Whitmer was joking, because she may be the party's best hope of reclaiming the White House in 2028. More from Nancy Kaffer: We talked to Whitmer about her new book and asked about tattoos, Gen X and 2028 We could talk here about the other guys likely to seek the 2028 nomination, a list that includes, at minimum, former Secretary of Transportation Pete Buttigieg, California Gov. Gavin Newsom, Illinois Gov. J.B. Pritzker, Pennsylvania Gov. Josh Shapiro, Colorado Gov. Jared Polis and Kentucky Gov. Andy Beshear, and will surely grow over the next three years. But I think it's a better idea to talk about Whitmer. She's a successful purple-state governor with decades of legislative, policymaking and executive experience. She speaks with intelligence and sensitivity on subjects from manufacturing to motherhood. She's got a knack for focusing on substantive issues that offer common ground, like funding our schools and fixing our roads. At 53, she's youthful and energetic ― but seasoned and experienced ― in a party with a surfeit of octogenarians, and she's a woman in a party whose voters, at times, seem disinclined toward white male candidates, at least at the state and congressional levels. Whitmer is an effective advocate for the causes she champions, and, as a mom who seemed to effortlessly balance raising two daughters, now grown, and leading the 10th most populous state in the nation, she's an aspirational figure for thousands of Michigan women who can't remember if they put money in their kid's school lunch account. (OK, it's me. I'm Michigan women.) Whitmer was elected and re-elected by wide margins, and her approval rating has never dipped below 50%, which is, in these sorry times, a real achievement. "She is a superb retail politician, and a really unique one," said pollster Richard Czuba of the Glengariff Group. "You watch her work a rope line, and she makes everyone feel seen. And she comes from a state that's a must-win for a Democrat." More from Freep Opinion: Trump's attacks on your access to news are all part of Project 2025 There's no denying that her willingness to work with President Donald Trump has disappointed some Democrats who would prefer blanket opposition to hopeful collaboration. That centrist thing, Czuba said, is really only a problem for the far flanks of both parties ― and they're not the swing voters who decide elections, in Michigan or in the U.S. "We did this question last year: Should an elected official cross party lines and negotiate with the other party to get something done, or should elected officials stick to the party's position and stand up for it?" said Czuba, of a survey likely voters for the Detroit Regional Chamber ahead of that year's Mackinac Policy Conference. "It was 70% to 19%." The 19%, he said, were on the far right and the far left. "She's doing exactly what most voters expect of their leaders," Czuba said. "The governor understands the middle in a way that few people understand independent, centrist voters. That's one of her strengths. She pays attention to the center. In a purple state like Michigan, if you don't, you lose. That's how Democrats can win nationally. "They need to pay attention to the center, because if you don't, you lose." This is who Whitmer has always been. Her political sensibility is best described as "cheerfully determined,' and if there were an Olympic event in keeping your cool, this lady would hold the gold medal. As late as January 2018, powerful Democratic men ― including Detroit Mayor Mike Duggan ― were working to replace Whitmer on the 2018 Democratic gubernatorial ballot. Her response? "I'm staying focused on running a campaign that can win, so we can get Michigan back to being a state our kids will stay in when they graduate …" Whitmer told me that year. "I'm eager to build the coalition … I'm eager to work with anyone who wants to solve problems." In 2019, when then-Senate Majority Leader Mike Shirkey, a Republican, called her "batshit crazy" to a crowd of supporters, or said in 2021 that he and the GOP Legislature had "spanked" Whitmer "hard" on the budget and appointments, the governor wasn't mad, just disappointed: "I think that we deserve better, frankly, but I'm not going to spend my energy there because I've got a lot of important things that I'm working on that the people of our state need us to be all-successful on." In her most recent State of the State, with Republicans back at the helm of the House of Representatives, Whitmer stayed on collaborative message: 'I took an oath to serve the people of Michigan — all the people. That's my commitment to you no matter who is in the White House or on the other side of the table in Lansing. Yes, I do hope to find common ground with President Trump and work with the Democratic Senate and Republican House on our shared priorities.' Whitmer doesn't start fights, but she's not a pushover. During the COVID-19 pandemic, she went toe-to-toe with Trump, who dubbed her "the woman from Michigan," and in 2022 she led the charge to enshrine reproductive rights in the state constitution after Roe v. Wade was overturned. She's a staunch supporter of civil rights, women's rights and LBGTQ+ rights, and she has made it clear that won't change. The Econ Club interview last month came on the heels of a rough week for Michigan's governor. A meeting with Trump, set to discuss a new fighter mission for Selfridge Air Force Base and invasive Asian carp in the Great Lakes, had taken a turn: After exchanging pleasant remarks with Whitmer and Michigan's Republican House Speaker Matt Hall, a wave of cameras poured into the Oval Office as Trump signed two executive orders authorizing politically motivated investigations of staffers who served in his first term. An uncomfortable Whitmer edged away from the action, at one point holding a folder in front of her face as a photographer snapped a picture. The image, published a few days later by the New York Times, reverberated through the political world. ("What was going through my mind at that moment?" she said to the Econ Club interviewer. "'I don't want my picture taken.'") I got dozens of texts the day the picture published, mostly from political insiders who saw The Folder Incident as Whitmer's Howard Dean scream. (Which, of course, is not actually what ended 2004 candidate Dean's presidential ambitions ... but we're still talking about it, 21 years later.) As story unfolded, some of the Democratic insiders and national pundits who had been enamored with the notion of Whitmer as a presidential contender soured on the governor. The honeymoon, it seemed, was over. I didn't feel so great about The Folder Incident myself. It was unpleasant to watch a strong female governor treated that way, and the image, I thought, would reverberate. But outside the political bubble, it was a different story. When I floated the suggestion that this might tank Whitmer's presidential future past a friend who's not knee-deep in politics, my friend was skeptical. "Hmm. I guess we'll see. The 2028 election is a long way away," she said. "Some people will just see it as, 'I have nothing to do with this.'" My friend isn't alone. In an Epic MRA poll conducted between April 28 and May 5 ― two weeks after the Oval Office meeting ― 52% of Michiganders said they approved of Whitmer's performance as governor, consistent with previous polls. In the same survey, just 41% said the same of Trump. A few weeks later, that new fighter mission at Selfridge Whitmer went to the White House to discuss ― it happened. Most folks in jobs like mine have responded to Whitmer's repeated assertions that she's into the job she has, not the one everyone thinks she wants, with mild eye-rolling to outright scoffing. But I believe her. When Whitmer says she's not running in 2028, it doesn't sound coy. It's been a punishing seven years, complete with a pandemic and a murder/kidnapping plot that an astounding number of people somehow see as a punchline or a put-up, and it's easy to imagine that she's ready for a break. Still, if I were a Democratic strategist, I'd be wondering whether I could persuade Whitmer to change her mind. Democrats want to win, but winning elections isn't just about numbers on the board. Voters are people, people whose lives are affected by who sits in the governor's mansion, or in the Oval Office. What Democrats need is to reconnect with voters, and Whitmer is among the few Democrats willing ― or able ― to give the party what it needs. Nancy Kaffer is the editorial page editor of the Detroit Free Press. Contact: nkaffer@ Submit a letter to the editor at and we may publish it online and in print. Like what you're reading? Please consider supporting local journalism and getting unlimited digital access with a Detroit Free Press subscription. We depend on readers like you. This article originally appeared on Detroit Free Press: Is Whitmer running for president? Democrats better hope so. | Opinion
