Trump Has a New Auto Loan Tax Break. Here’s Who Could Benefit.

Trump’s new auto loan tax break lets many middle‑income borrowers deduct interest on qualifying new car loans from their federal income taxes between 2025 and 2028, but it excludes high earners, used cars, leases, and business vehicles. In practice, the biggest dollar benefits go to borrowers who both pay a lot of interest and are in higher (but still under‑cap) tax brackets.​

What the new break does

• The law allows an “above‑the‑line” deduction for interest paid on qualifying auto loans in tax years 2025–2028, meaning you can claim it even if you take the standard deduction.​

• You can deduct up to $10,000$ in auto loan interest per year across all qualifying loans.​

• The vehicle and loan must be new, for personal use, with the loan originated after December 31, 2024, and the car bought between 2025 and 2028.​

Who can claim it

• The deduction is targeted to middle‑income households: it starts to phase out when modified adjusted gross income exceeds $100,000$ for single filers and $200,000$ for joint filers.​

• Above those thresholds, the allowable deduction shrinks (for example, reduced by about $200$for every $1,000$ over the limit) and disappears entirely at higher incomes.​

• You do not need to itemize, but you must file the new attachment (such as Schedule 1‑A) and report interest documented by your lender.​

What vehicles qualify

• Only new passenger vehicles with final assembly in the United States and a gross vehicle weight rating under 14,000 pounds qualify (cars, SUVs, pickups, minivans, many motorcycles).​

• Used vehicles, leases, and vehicles primarily for business use are excluded from this particular deduction, even though business owners may have separate business deductions.​

• Qualifying new electric vehicles may allow “stacking” this deduction on top of the federal EV tax credit if all rules for both are met.​

Who really benefits most

• Households under the income caps who finance a new, U.S.-assembled vehicle and pay substantial interest will see the largest dollar savings because deductions are worth more at higher marginal tax rates.​

• Lower‑income borrowers do qualify, but if their tax bracket is low or their total interest is modest, the actual tax savings may be relatively small (for example, $1,200$ in interest in the 12 percent bracket yields about $144$ in savings).​

• The structure favors buyers of higher‑priced, U.S.-made vehicles who borrow more and for longer terms, as long as their income stays below or not too far above the phase‑out thresholds.​

Impact on automakers and the market

• By limiting the benefit to U.S.-assembled vehicles, the deduction is designed to channel demand toward domestic auto plants and suppliers.​

• Analysts expect some boost to new‑car sales and loan volume, which benefits dealers, lenders, and domestic manufacturers, though the overall affordability impact for typical buyers may be modest relative to high vehicle prices and interest rates.​