The Internal Revenue Service (IRS) and the U.S. Treasury Department have just launched official guidance on a new tax credit that could save car buyers up to $10,000 in 2026.
This guidance applies to the “no tax on auto loan interest” provision under the recently approved Big, Beautiful Bill.
It applies to vehicle loan interest on new U.S.-made vehicles purchased after December 31, 2024, for personal use.
The new guidance outlines how the provision will apply to taxpayers and lenders, including key transition rules for 2025 when the program launches.
Whether a car buyer takes the standard deduction or itemized deductions, this is an opportunity to reduce taxable income by deducting loan interest — up to $10,000 per year.
According to the IRS, qualifying vehicles include cars, SUVs, trucks, pickup trucks and motorcycles weighing less than 14,000 pounds, as long as final assembly occurs in the United States
The deduction is available for tax years beginning after December 31, 2024, and before January 1, 2029.
Under the policy change, taxpayers can deduct up to $10,000 in auto loan interest, with some important caveats:
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The policy only covers new vehicles made in the United States, meaning the final assembly of the vehicle must take place in the United States
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When claiming this deduction, taxpayers should ensure that their bank reports the interest correctly so that they can properly claim the deduction.
The IRS will accept public comments on how to implement the law through Regulations.gov until February 2, 2026.
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