New $10K Auto Loan Tax Deduction: Who Qualifies & How to Claim

New Auto Loan Tax Break Could Save You Thousands

If you are planning to buy a car soon, we have great news for you! A new tax law just passed in the United States. It can help you save thousands of dollars when you buy a car.

The law is called the One Big Beautiful Bill Act, or OBBBA for short. One of the biggest parts of this law is a new tax deduction for people who get a car loan. This change starts in 2025 and goes until the end of 2028.

Let’s break it down and see how you can save money.

What Is a Tax Deduction?

A tax deduction helps you pay less money in taxes. It lowers the amount of your income that the government uses to figure out how much tax you owe.

So, if you earn $80,000 a year and you get a $10,000 tax deduction, the government only taxes you on $70,000. That means you pay less in taxes—and keep more of your money!

What Does the New Law Say?

The OBBBA says that you can deduct up to $10,000 in auto loan interest if you:

• Buy a car between 2025 and 2028
• Take out a loan to buy the car
• Meet the income rules
• Buy a car that was assembled in the United States

This is a big deal, because in the past, most people could not deduct car loan interest unless the car was for a business. Now, many more people can take this deduction—even if the car is for personal use.

How Much Can You Save?

You can deduct up to $10,000 in interest from your taxes.

Let’s say you buy a car in 2025 and get a loan. Over a few years, you might pay $9,000 in interest. You can deduct all of that interest from your taxes.

This could save you hundreds or even thousands of dollars, depending on your tax rate.

Who Can Get This Tax Break?

Not everyone can get this deduction. There are some rules.

• Income Limits

You must make less than $100,000 if you file taxes alone. If you are married and file taxes together, your household must make less than $200,000.

If you earn more than that, you can’t take the deduction.

• Car Must Be Assembled in the U.S.

The car must be put together (assembled) in the United States. Many popular car brands build vehicles in the U.S., but some don’t.

Before you buy a car, ask the dealership or seller if it was assembled in the U.S. You can also check the window sticker or the Vehicle Identification Number (VIN).

What Types of Cars Qualify?

The law does not limit the deduction to electric or hybrid cars. It applies to all kinds of vehicles—gas, hybrid, or electric—as long as:

• The car was built in the U.S.
• You bought it with a loan (not a lease)
• You meet the income rules

So whether you buy a pickup truck, a small car, or an SUV, you may still qualify.

What About Leases?

This tax break is only for people who buy a car using a loan. If you lease a car, you cannot use this deduction.

A lease is different from a loan. When you lease, you pay to use the car, but you don’t own it. When you get a loan, the car becomes yours after you finish paying it off.

When Does the Tax Break Start?

This deduction starts on January 1, 2025. It ends on December 31, 2028.

That means if you buy a car with a loan in 2025, 2026, 2027, or 2028, and meet all the rules, you can use the deduction.

After 2028, the law may or may not continue, depending on what Congress decides.

How Do You Claim the Deduction?

When you file your taxes in 2026 for the year 2025, your tax software or accountant will ask if you had any car loan interest.

You’ll need to:

• Track your interest payments
• Show that the car was assembled in the U.S.
• Prove that you meet the income limit

If you use a tax professional, just tell them you bought a car and took out a loan—they’ll know what to do.

Tips to Make the Most of It

Here are a few quick tips to help you get the most from this tax break:

1. Buy sooner rather than later. The tax break ends in 2028.
2. Choose a car built in the U.S. Not all cars qualify!
3. Keep records. Save your loan documents and payment history.
4. Stay under the income limit. If your income is close to the cutoff, ask a tax expert for help.

Why Did Congress Do This?

Lawmakers want to help working families afford cars. Car prices are high, and interest rates have gone up in recent years. This tax break is meant to:

• Make car loans more affordable
• Support American jobs and car factories
• Put more money back in your pocket

It’s part of a larger plan to give more tax help to middle-class families.

Final Thoughts

This is one of the biggest new tax breaks in years—especially for people who plan to buy a car soon. If you qualify, you could save up to $10,000 in interest over time.

Just make sure you:

• Buy between 2025–2028
• Use a loan (not a lease)
• Stay under the income limit
• Choose a car built in the U.S.

Talk to a tax pro or financial advisor to see how this can fit into your plans.

You might save more than you think!