President Donald Trump is proposing a new tax policy related to car loans aimed at encouraging Americans to buy vehicles made in the United States.
Under Trump’s plan, car buyers would be able to deduct interest paid on auto loans — but only if the vehicle was manufactured domestically.
The proposal was announced during closed-door discussions with Republican lawmakers including Senator John Thune and Representative Mike Johnson. According to Trump, the goal is twofold: to support American manufacturing jobs and provide financial relief to middle-class consumers struggling with high auto loan rates.
“It’s a win for American workers and a win for American buyers,” Trump said in a statement released March 28. “If you buy a car made here, you should get rewarded.”
President Trump is pushing a brand new policy that’s never been done before: If you buy a car that is made in the US, you will soon be able to deduct the interest payments on the car loans from federal taxes. pic.twitter.com/k6gqfxLAJk
— Charlie Kirk (@charliekirk11) March 28, 2025
Here’s how it would work: if you finance the purchase of a vehicle assembled in the U.S., you could deduct the interest portion of your monthly car loan payments from your federal income taxes. Imported vehicles would not qualify.
For many buyers, this could result in annual tax savings of several hundred dollars — potentially more for large loan balances. It’s a proposal that directly appeals to working families, who often finance new car purchases with loans carrying interest rates between 5% and 9%.
| Feature | Current Law (2025) | Trump’s Proposed Deduction |
|---|---|---|
| Interest on Car Loans | Not deductible on federal taxes | Deductible if the vehicle is U.S.-made |
| Vehicle Eligibility | No car loans qualify | Must be manufactured or assembled in the U.S. |
| Estimated Tax Savings | $0 | ~$300–$1,000/year depending on loan size and interest rate |
| Who Benefits Most | N/A | Middle- to upper-middle-income buyers with financed U.S.-made vehicles |
| Foreign-Made Vehicle Buyers | No deduction | Not eligible for deduction |
| Policy Status | Active law — no car loan deductions allowed | Not yet law — requires Congressional approval |
Example: If you finance a $35,000 U.S.-made vehicle at 7% interest over five years, you could deduct approximately $1,500–$2,000 in interest payments over the life of the loan — if this proposal becomes law.
While the idea is being promoted as a fresh approach, similar deductions for consumer interest existed before the 1986 tax reform law, which eliminated most non-mortgage interest write-offs. Some economists see this as a return to earlier models of consumer tax relief tied to national production incentives.
Analysts have pointed out that the policy would require strict definitions of “U.S.-made” vehicles, which can be complicated. Many cars sold by foreign automakers are assembled in U.S. factories, while some vehicles by American brands are made overseas.
There are also concerns about whether the benefit would skew toward certain income groups. Higher-income buyers with larger loan amounts could see greater dollar-for-dollar benefits, while lower-income buyers might receive limited tax relief depending on their taxable income and filing status.
As of now, the proposal is not yet law. It would require Congressional approval and likely be included in a broader tax package if pursued. No formal bill has been introduced.
Still, for consumers considering a car purchase in the coming year, the idea signals a possible shift in how federal tax policy may incentivize buying American-made products again — at the dealership level.
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