The Trump Interest Tax Deduction, officially the “No Tax on Car Loan Interest” provision from the One Big Beautiful Bill Act signed in July 2025, continues to make waves in the auto market as we move through early 2026. This temporary tax break, running through tax year 2028, lets eligible buyers deduct up to $10,000 annually in interest paid on loans for qualifying new vehicles.
Key details: It applies to loans originated after December 31, 2024, for new, U.S.-assembled vehicles (final assembly in the United States) purchased for personal use—think cars, SUVs, minivans, pickups, vans, or motorcycles under 14,000 pounds GVWR. Used cars, leases, and business-use vehicles are excluded. The deduction is available whether you itemize or take the standard deduction, with a phase-out starting at $100,000 modified adjusted gross income for singles ($200,000 for joint filers). IRS guidance, including proposed regulations from late 2025, clarifies eligibility and reporting, helping taxpayers claim it on 2025 returns filed this year.
For many buyers facing average new-vehicle prices around $48,000 and interest rates often 6-7% or higher, the savings add up. On a typical $40,000 loan at 7% over 60-72 months, early-year interest can exceed $2,000—potentially fully deductible for those under the income caps—effectively lowering the real cost of ownership and offsetting some of the sting from elevated rates and prices.
Dealerships have seized on this as a marketing hook, often spotlighting it in ads, financing pitches, and "Made in America" promotions to drive traffic toward domestic brands like Ford, GM, Chevrolet, and others with U.S. assembly. Early 2026 reports suggest it's boosting inquiries and conversions, especially for trucks and SUVs where buyers finance larger amounts and see bigger potential tax perks. Proponents argue it supports American jobs and manufacturing; critics call it a limited, deficit-adding benefit skewed toward certain buyers.
With tax season underway for 2025 purchases and more buyers becoming aware, this deduction is reshaping affordability conversations at the point of sale.
To our dealer readers at AutoSpies: Are you actively promoting the Trump car loan interest tax deduction in your stores—through signage, finance office talks, or marketing—and is it moving more metal? To our consumer readers: If you've been in the market recently, has your dealer pitched this deduction to you as part of the deal? How has that conversation influenced your decision?