You could get a $10,000 tax break on your car loan — who qualifies and how to claim it

A new tax rule is now giving people a chance to save money on car loans this tax season. This rule came from a law called the One Big Beautiful Bill Act, passed by Republicans and signed by Donald Trump last year. The law allows people to deduct (cut down) the interest they pay on car loans from their taxes. The Internal Revenue Service (IRS) has released rules on how this tax break works.

Who can get this tax break

This benefit is only for new personal vehicles, not for business or commercial vehicles. The car must be made in America and bought after Dec. 31, 2024, as stated by Fox Business. If you are leasing a car, you cannot claim this benefit.

How much money you can save

You can deduct up to $10,000 per year from your taxable income. This works for both people who itemize deductions and those who take the standard deduction. Important: This does not mean you get $10,000 cash — it only reduces your taxable income, so the real savings will be smaller.

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Income limits you must follow

If you earn too much, the benefit starts reducing. The phase-out starts at $100,000 income (single) and $200,000 (married couples).

Vehicle rules you must check

The car must have final assembly in the U.S. You can check this by looking at the label at the dealership, checking the VIN number, and using the National Highway Traffic Safety Administration VIN decoder, as noted by Fox Business. You must include your car’s VIN (Vehicle Identification Number) in your tax return every year you claim the deduction.

If you refinance your car loan later, the interest on the new loan can still qualify. The rule applies starting from the 2025 tax year, so interest paid after Dec. 31, 2024 counts.

Time limit

This tax break is temporary and part of a bigger tax package. It will end in 2028 unless Congress decides to extend it. If you buy a new U.S.-made car with a loan and meet income rules, you can reduce your taxes — but only for a few years and not the full $10,000 in cash, as cited by Fox Business.

FAQs

Q1. Who can get the car loan tax break?

People who buy a new U.S.-made personal car after 2024 and meet income limits can claim it under the One Big Beautiful Bill Act.

Q2. How much tax benefit can I get from a car loan?

You can deduct up to $10,000 in interest per year, but the real savings depends on your income and tax rate as per the Internal Revenue Service.