For the 2025 tax year, eligible U.S. taxpayers can deduct up to $10,000 in auto loan interest under a temporary provision enacted as part of President Donald Trump’s One Big Beautiful Bill Act.
However, most eligible borrowers will deduct far less, largely because even sizable auto loans don’t generate anywhere near $10,000 in interest in a single year. That figure is closer to what borrowers typically pay in total interest over the life of a 72-month new-car loan, per Edmunds, a car-shopping and automotive data company.
Instead, for most borrowers, the deduction is more likely to provide tax savings measured in hundreds of dollars a year, not thousands, according to automotive research firm Cox Automotive.
Eligibility rules further narrow who can claim the deduction, since it applies only to newly purchased vehicles financed after Dec. 31, 2024, excludes foreign-assembled cars and phases out for higher earners.
“This tax credit is limited, won’t be a market mover and is not a tool to substantially address the affordability challenges and high interest rates our market faces,” Jeremy Robb, chief economist at Cox Automotive, tells CNBC Make It.
