car tax deduction: Up to $10,000 tax deduction on cars? Here’s who qualifies and how to claim it

A new law called the “Big Beautiful Bill” changed car tax rules in the US. Earlier, people could get up to $7,500 tax credit for electric cars, but that benefit is now removed. Instead, a new benefit is introduced: people can now deduct up to $10,000 per year on car loan interest. This deduction is only for new cars bought between Jan. 1, 2025 and Dec. 31, 2028. The deduction is only on the interest paid on the loan, not the full car price.

How much money you actually save

Most people don’t pay $10,000 interest yearly, so real savings are smaller. Experts say typical savings may be around $300 to $900 per year, as per the report by USA Today. This tax benefit may push more people to buy US-made cars. Buyers are now more interested in where a car is made due to tariffs and this tax benefit, as per Patrick Masterson told Detroit Free Press.

Rules to qualify for this deduction

Only new cars qualify, used cars are not allowed. The car must be bought, not leased. The car must be used mostly for personal use.
Income limits apply:

Single people: up to $100,000 income

Married couples: up to $200,000 income

If income is higher than this, deduction reduces by $200 for every $1,000 extra.

What type of cars qualify

Many types of vehicles qualify: cars, SUVs, vans, pickups, and even motorcycles. Vehicle weight must be under 14,000 pounds, as per IRS rules cited by USA Today. Heavy-duty trucks usually do NOT qualify, as per Patrick Masterson told Detroit Free Press. The most important rule: the car must be assembled in the United States.

Live Events

How to check if a car qualifies

Check the VIN number — if it starts with 1, 4, or 5, it is made in the US. You can also check Cars.com’s American-Made Index list. Look at the car’s window sticker (Monroney sticker) for assembly details. You can also check VIN on the NHTSA website.

Examples of cars that may qualify

Some cars expected to qualify include:

Tesla Model Y

Ford F-150

Chevrolet Corvette

Toyota Corolla Cross

Acura MDX

More cars may qualify, and the list can change every year.

How to claim this tax deduction

You must enter the car’s VIN on Schedule 1-A form, according to Susan Tompor told Detroit Free Press. Then add the deduction to your Form 1040 (line 13b). You can claim it whether you take standard deduction or itemize.

This benefit is not the same for everyone — savings depend on your loan, income, and interest, as noted by Patrick Masterson told Detroit Free Press. Buyers should compare if this tax benefit is better than other deals on imported cars. Experts say there is no single best choice — it depends on each person’s situation.

FAQs

Q1. Who can get the $10,000 car tax deduction?

People who buy a new car made in the US, take a loan, and have income within the limit can claim it.

Q2. Can I get this tax deduction on used or leased cars?

No, this benefit is only for new cars that are bought, not used or leased.