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Chairman Smith: Taxpayers Benefit from No Tax on Auto Loan Interest for Made-in-America Cars

February 19, 2026

WASHINGTON, D.C. – With a new economic boom resulting from the Working Families Tax Cuts, American workers and families will be able to use a new tax deduction for auto loans on qualified vehicles purchased for personal use. The deduction is for new vehicles that were made in the United States purchased from 2025 through 2028 and for individuals that earn up to $100,000 or $200,000 for joint filers. 

Ways and Means Committee Chairman Jason Smith (MO-08) said: 

“When a middle-class family chooses to purchase a new American-made vehicle, they will benefit from lower taxes thanks to the Working Families Tax Cuts. This deduction makes it more affordable to purchase a new car, allowing up to $10,000 of car interest to be deducted. Unlike Democrats’ approach of rewarding wealthy, coastal elites with tax breaks for luxury electric vehicles, we are helping Americans purchase the cars that make the most sense for them, so long as they’re made in the U.S.A.” 

How “No Tax on Car Loan Interest” works: 

  • New Deduction: Effective from 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)
    • Maximum annual deduction is $10,000.
    • Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers). 
  • Qualified Interest: To qualify for the deduction, the interest must be paid on a loan that is:
    • Originated after December 31, 2024, 
    • Used to purchase a vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify), 
    • For a personal use vehicle (not for business or commercial use), and 
    • Secured by a lien on the vehicle. 
  • Taxpayer Eligibility: Deduction is available for both itemizing and non-itemizing taxpayers. 

If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction. 

  • Qualified Vehicle: A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States. 
  • Final Assembly in the United States: The location of final assembly will be listed on the vehicle information label attached to each vehicle on a dealer’s premises. Alternatively, taxpayers may rely on the vehicle’s plant of manufacture as reported in the vehicle identification number (VIN) to determine whether a vehicle has undergone final assembly in the United States.
    • The taxpayer must include the Vehicle Identification Number (VIN) of the qualified vehicle on the tax return for any year in which the deduction is claimed. 
    • The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) provides plant of manufacture information. Taxpayers can follow the instructions on that website to determine if the vehicle’s plant of manufacture was in the United States.