A new federal tax deduction tied to auto loans could reduce costs for buyers, according to an analysis by Anderson Economic Group.
The provision, included in the One Big Beautiful Bill Act, allows eligible taxpayers to deduct up to $10,000 in interest paid on loans used to purchase a new passenger vehicle.
According to the Anderson Economic Group, the deduction applies to loans originated between 2025 and 2028 and is available even to taxpayers who do not itemize deductions.
To qualify, the vehicle must be assembled in the United States, purchased for personal use and meet weight and road-use requirements set out in the law.
Anderson Economic Group noted that the deduction could lower the effective cost of buying a new vehicle for eligible households, particularly during the early years of a loan when interest payments are highest.
Because the deduction is taken above-the-line, it can benefit a wider range of taxpayers than many existing tax breaks tied to itemized deductions.
The analysis also pointed out that the policy may encourage demand for vehicles assembled in the United States by linking the tax benefit directly to domestic production.
At the same time, Anderson Economic Group noted that the benefit is temporary and subject to income phaseouts that reduce or eliminate eligibility for higher-earning households.
The group also cautioned that buyers must verify final assembly location and income eligibility before expecting any tax savings.
Separate analysis by the CPA Practice Advisor focused on how the deduction may affect consumers at the individual level.
CPA Practice Advisor reported that many buyers are likely to pay less than $10,000 in annual interest, meaning some qualifying taxpayers could deduct most or all of their auto loan interest.
The outlet also highlighted that the deduction applies only to new vehicles, excluding used car purchases from eligibility.
Income limits further narrow the pool of beneficiaries, with moderate- and higher-income households seeing reduced benefits or none at all, depending on their earnings.
CPA Practice Advisor noted that while the deduction may lower tax bills for qualifying buyers, it does not change the upfront price of vehicles or interest rates offered by lenders.
Both analyses indicated that the new deduction represents a departure from longstanding tax rules that generally disallowed personal auto loan interest.
The ultimate impact will depend on household income, loan terms, vehicle eligibility and how consumers respond to the incentive once it takes effect.
Jim Mishler ✉
Jim Mishler, a seasoned reporter, anchor and news director, has decades of experience covering crime, politics and environmental issues.
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