The so-called “big beautiful bills” come with quite a few downsides. Right now, we’re dealing with some odd environmental laws, the disappearance of EV tax credits, and, I think, Texas has taken control of quite a lot, including the space shuttle. This bill, in a way, manages to keep some promises, proving that even a broken clock can be right sometimes. But, there are definitely some strings attached.
According to reports, the new deduction only applies to loans for new cars—not leases or used vehicles. In the U.S., you can deduct interest on loans of up to $10,000 per year for lighter vehicles, specifically those weighing under 14,000 pounds, from 2025 to 2028. This includes a range of vehicles like trucks, SUVs, vans, and motorcycles. However, it’s worth noting that these vehicles should be for personal use, not for businesses or fleets. A maximum deduction is available for individuals making a joint income up to $100,000, or $200,000 for couples. Beyond those limits, the benefits start to diminish—$200 is deducted for every $1,000 earned over $150,000 for singles and $250,000 for couples. On a positive note, unlike mortgage interest deductions, you can still claim this deduction even if you take the standard deduction instead of itemizing your taxes.
How useful is this?
These tax credits for vehicles made in America are, in a way, incentives aimed at curbing imports. The actual savings can really differ based on your loan amount, interest rates, and other variables. Right now, the average new car loan sits around $44,000 over six years. If you’ve got good credit and a 6.5% interest rate, you might be able to deduct about $3,000 in the first year, which translates to roughly $660 in tax savings. That’s quite a bit lower than the previous EV credits of $7,500 for new cars and $4,000 for used ones. Also, remember that while car loans are longer than ever, this deduction disappears after 2028.
Another tricky point is that the deduction only applies to vehicles manufactured in the U.S., regardless of where the automaker is headquartered. So, for instance, although Ford is an American brand, a “Hecho En Mexico” Ford Mustang Mach E wouldn’t qualify. On the flip side, a Toyota Tundra, built in San Antonio, does qualify, even though Toyota’s base is in Japan. This could mislead consumers who might assume the deduction depends on the company’s origin instead of where the car was made, pushing them towards “buying American” when the reality might not align.
Sure, some folks will see benefits from this tax credit. They’ll just need to hit the right income bracket and select the right vehicle, produced in the right location.
