New Tax Deduction for US-Assembled Cars Caps Interest Write-Off at $2,500 Starting in 2026

The “Made in America Motors Act” is rolling out a new tax benefit aimed squarely at individual taxpayers who finance a car, but there’s a big caveat: the car has to be assembled here in the U.S. Starting with tax years after December 31, 2025, this bill creates an “above-the-line” deduction for interest paid on qualified motor vehicle loans, capped at a maximum of $2,500 annually. This is a big deal because “above-the-line” means you can claim it whether you itemize your taxes or take the standard deduction, directly lowering your taxable income.

The $2,500 Question: Who Qualifies?

This isn’t a blanket deduction for every car loan out there. To qualify for the new write-off, the interest must be from a loan taken out on or after January 1, 2025, specifically to buy a “qualified motor vehicle.” The bill defines this vehicle strictly: it must have four wheels, weigh less than 14,000 pounds, and, most importantly, the final assembly must have taken place within the United States. The bill even details what “final assembly” means—essentially, when the manufacturer finishes putting the car together at a U.S. plant, making it mechanically ready to run. If you buy a new car that was assembled overseas, even if it’s from a U.S. brand, you won’t get this deduction.

Why This Matters for Your Wallet

For someone taking out a typical car loan, this $2,500 cap is a modest but real benefit. For example, if you finance a new truck and pay $3,500 in interest over the year, you can deduct $2,500 of that, saving you a few hundred dollars on your tax bill depending on your bracket. This is a direct incentive to buy domestically assembled cars, which helps manufacturers with U.S. plants. It’s a clear policy choice to use the tax code to support domestic manufacturing jobs.

The Catch: What About Imported Cars?

Here’s where the policy gets tricky. By tying the deduction exclusively to U.S.-assembled vehicles, the bill creates a financial disadvantage—or rather, removes a potential benefit—for consumers who choose vehicles assembled elsewhere. If you’re eyeing a model that’s only assembled in Canada, Mexico, or Europe, you’re essentially paying a slightly higher effective price because you miss out on the tax break. This could impact buyers who rely on imported models due to price, size, or availability, potentially limiting their choices or increasing their overall cost of ownership compared to those buying the qualifying domestic models. It’s a targeted subsidy, not a universal one.

Implementation and Real-World Hurdles

Since this is an above-the-line deduction, it’s relatively simple to claim—no need to gather a ton of itemized deductions just to clear the threshold. However, taxpayers will need clear documentation from dealers and lenders confirming that their vehicle meets the “final assembly in the U.S.” requirement, especially as the definition of final assembly can get technical. While the intent is clear—boost American automotive assembly—the practical reality for consumers will be checking a new box before they sign the loan papers: Is this vehicle eligible for the $2,500 interest deduction?