Treasury and the IRS on December 31, 2025, released proposed rules for the new deduction for car loan interest, which applies only to new vehicles whose final assembly took place in the USA.
What the rules cover
- The deduction applies to interest on loans taken out after December 31, 2024, to buy a new vehicle for personal use, through 2028.
- It is capped at $10,000 a year and is available whether or not the taxpayer itemizes. It begins to phase out at $100,000 of income for single filers and $200,000 for joint filers.
- Buyers can confirm USA final assembly from the vehicle information label on new cars or by running the VIN through the National Highway Traffic Safety Administration’s database.
- Lenders that receive $600 or more of interest from an individual in a year must report it to the IRS and the borrower.
Comments are due February 2, 2026, and a public hearing is set for February 24, 2026.
“For the administration it’s clearly aimed at supporting and boosting domestic auto production and domestic auto consumption.”
Andrew Lautz, Bipartisan Policy Center, to Bloomberg News
Bloomberg reported that 14 of the 25 most popular new models sold in 2024 had final assembly only in the USA, according to the Bipartisan Policy Center. Lautz said the savings will likely be modest, a “couple hundred dollars” in the first year on a $50,000 vehicle.
Why it matters for Made in USA
The deduction depends on final assembly, not on how much of the vehicle is made in the USA. A car assembled in the USA from mostly imported parts qualifies, while a model with high USA parts content assembled abroad does not. The label buyers are told to check is the one required by the American Automobile Labeling Act, which shows both final assembly and parts content.
We covered the law’s final assembly rule when it passed: Car loan interest deduction requires final assembly in the USA.
FAQ
Which cars qualify for the car loan interest deduction?
New vehicles bought for personal use with final assembly in the USA, on loans taken out after December 31, 2024.
How do I check where my car was assembled?
Look at the vehicle information label or run the VIN through NHTSA’s database.
How much can I deduct?
Up to $10,000 of interest a year, with phase-outs starting at $100,000 (single) and $200,000 (joint) of income.
Source & credit
Source: IRS news release IR-2025-129, December 31, 2025: Treasury, IRS provide guidance on the new deduction for car loan interest. Additional reporting by Bloomberg News via The Spokesman-Review.