A $30.6 billion deduction rewards where a car is built, not what it costs

Starting with loans originated after December 31, 2024, a buyer financing a new car can deduct the interest — up to $10,000 a year — whether or not they itemize.▸ The Joint Committee on Taxation scores the provision, part of the One Big Beautiful Bill Act signed into law July 4, 2025, at $30.6 billion in forgone federal revenue over the next decade. The deduction doesn't turn on income beyond a phase-out, or on the price of the car. It turns on where the car was assembled — a fact encoded in the vehicle's identification number, not its window sticker.

The mechanics, laid out in Treasury and IRS proposed regulations issued December 31, 2025, are narrower than "buy American" branding suggests.▸ The loan must be originated after December 31, 2024, used to buy a new vehicle (not a lease, not a used car) for personal rather than business use, and secured by a lien on the car. The deduction phases out for taxpayers with modified adjusted gross income above $100,000 ($200,000 for joint filers), and it is gone after tax year 2028 — the same sunset as the law's other "no tax on X" worker provisions.

The gate that matters most, though, is geographic: the vehicle's final assembly must have occurred in the United States.▸ The IRS guidance directs taxpayers to look up their own vehicle's plant of manufacture through the National Highway Traffic Safety Administration's VIN decoder — the same 17-character code stamped on every car, not a brand name. That's a meaningfully different test than "American-made" as a brand. Import a domestic nameplate assembled abroad, and the interest doesn't qualify; finance a foreign nameplate built at a U.S. plant, and it does. Honda Ridgelines, Toyota Camrys, Nissan Pathfinders, and Subaru Foresters are all assembled solely in U.S. plants — in Alabama, Kentucky, Tennessee, and Indiana — according to Cars.com's 2026 American-Made Index, whose assembly-location data draws on manufacturers' disclosures under the National Highway Traffic Safety Administration's American Automobile Labeling Act.

Car loan interest is also the second-cheapest of the four provisions the same law bundled under "Delivering on Presidential Priorities to Provide New Middle-Class Tax Relief" — smaller than the deduction for tips, and less than a third the size of the one for overtime:

Run the VIN test across the actual U.S. new-vehicle market and the pool of outright-qualifying cars is a minority.▸ Of the 379 light-duty models automakers sold or planned to sell for the 2026 model year, Cars.com found 119 assembled solely in the United States, 243 with no U.S. final assembly at all, and 17 split between a U.S. plant and a foreign one depending on trim or region — meaning a buyer of one of those 17 has to check the specific VIN, not just the model name, to know if the loan qualifies.

The industry the assembly requirement is anchored to is not small.▸ BLS Current Employment Statistics counted roughly 955,000 people working directly in U.S. motor vehicle, motor-vehicle-body-and-trailer, and motor-vehicle-parts manufacturing in May 2026 — the plants and supplier lines whose output is what the VIN test is actually checking for. That workforce doesn't uniformly benefit from the deduction; it benefits from continued demand for the vehicles it builds, which is a different, looser chain of cause and effect than "this worker's paycheck depends on this tax break."

Cost figures reflect the enacted text as scored by the Joint Committee on Taxation on July 1, 2025 (JCX-35-25); the vehicle-assembly breakdown is Cars.com's 2026 model-year snapshot and will shift as automakers change sourcing; the manufacturing-employment figure is a preliminary May 2026 BLS estimate for the industry generally, not a count of workers whose jobs depend on this specific deduction.