How to Claim Trump’s American-Made Car Tax Deduction

To claim the American-made car tax deduction, you report qualifying auto loan interest on Part IV of Schedule 1-A (Form 1040), using the vehicle’s VIN and the interest total reported by your lender on Form 1098-VLI. The deduction is capped at $10,000 per year, phases out at higher incomes, and is available for tax years 2025 through 2028. You can claim it whether you take the standard deduction or itemize.¹

Which Vehicles and Loans Qualify

The law calls the eligible vehicle an “applicable passenger vehicle,” and every condition has to be met. The vehicle must be new, meaning its original use starts with you. Its final assembly must occur in the United States. It must be bought for personal or household use, not for commercial or fleet purposes. Cars, minivans, vans, SUVs, pickup trucks, and motorcycles all count. The gross vehicle weight rating must be under 14,000 pounds, which covers virtually all consumer vehicles.²

The loan itself has to be secured by a first lien on the vehicle. An unsecured personal loan used to buy a car does not generate qualifying interest, and neither does a second loan taken against a vehicle already pledged as collateral.² Refinancing a qualifying loan is allowed; the interest on the refinanced balance generally remains eligible.³

How to Verify U.S. Final Assembly

Before you claim, confirm the vehicle was assembled in the United States. The IRS proposed regulations give you two accepted methods. Check the first character of the VIN: vehicles starting with 1, 4, or 5 were assembled in the U.S. You can also check the label required by federal regulations, often part of the Monroney sticker on the window, which identifies the final assembly point.⁴

The deduction turns on final assembly location, not on domestic parts content. A vehicle assembled in Ohio with 40% domestic parts qualifies. A vehicle assembled in Mexico or Canada with a higher parts percentage does not, even if it wears a domestic brand name.⁴

Income Limits That Reduce the Deduction

The $10,000 cap shrinks as your income rises. If your modified adjusted gross income exceeds $100,000 as a single filer or $200,000 on a joint return, the maximum deduction is reduced by $200 for every $1,000 (or fraction of $1,000) above the threshold.²

Here’s how that math runs. A single filer with $115,000 in MAGI is $15,000 above the threshold. Fifteen increments of $1,000, times $200, produces a $3,000 reduction. Their maximum deduction drops from $10,000 to $7,000. The deduction disappears entirely at $150,000 for single filers and $250,000 for joint filers.

MAGI for this deduction means your adjusted gross income increased by any income excluded under the foreign earned income exclusion or income from Guam, American Samoa, or Puerto Rico.² For most domestic earners, MAGI equals AGI.

What Does Not Qualify

Several categories are excluded outright:

Leases. Lease payments are not loan interest, and the deduction covers only interest on a loan used to purchase a vehicle.⁵
Used vehicles, certified pre-owned cars, and private-party purchases of previously owned vehicles.
Fleet purchases.
Vehicles with a salvage title.
Vehicles bought for scrap or parts.
Business vehicles already deducted elsewhere. If you deduct vehicle interest on Schedule C, E, or F as a business expense under Section 162, you cannot claim those same amounts on Schedule 1-A. The form requires you to subtract any interest already deducted on a business schedule.⁶

How to File the Claim

Report the deduction on Part IV of Schedule 1-A (Form 1040). You’ll need two things for each qualifying vehicle: the VIN and the total qualifying interest paid during the year.⁶ The VIN is not optional. The statute makes it a condition of the deduction, so leaving it off means the interest does not qualify.²

Your lender reports the interest you paid on Form 1098-VLI, a new information return created for this deduction. Lenders who receive $600 or more in qualifying passenger vehicle loan interest during the year must furnish this statement to you.⁷ If you don’t receive one, your year-end loan statement should still show total interest paid. Keep that record in case the IRS follows up.

The form takes you through the calculation in sequence. Enter your total qualifying interest, apply the $10,000 cap, then calculate any phase-out reduction based on MAGI.⁶

The $10,000 cap applies per tax return, not per vehicle. If you’re paying off two qualifying cars at the same time, you combine the interest from both loans up to that ceiling.² The deduction sits on Schedule 1-A, not Schedule A, so you get it whether you take the standard deduction or itemize.¹

What the Deduction Is Worth

This is a deduction, not a credit, so the actual savings depend on your marginal tax rate. A $10,000 deduction saves someone in the 22% bracket $2,200 in federal income tax. In the 12% bracket, the same $10,000 deduction saves $1,200. The deduction reduces the income your tax is calculated on, not the tax bill directly.

Most car loans front-load interest in the early years of the term. A five-year loan at 6.5% on a $40,000 vehicle produces roughly $2,500 in interest during the first year, and considerably less by year four. The deduction is worth the most in the first year or two of ownership.

When the Deduction Ends

The provision is temporary. It applies to tax years beginning after December 31, 2024, and before January 1, 2029, covering the 2025, 2026, 2027, and 2028 tax years.² Unless Congress extends it, interest paid on a qualifying vehicle loan in 2029 and later reverts to being nondeductible personal interest. If you finance a qualifying vehicle in 2025 and the loan runs through 2030, you claim the deduction only for 2025 through 2028.³

1
Internal Revenue Service. Treasury, IRS Provide Guidance on the New Deduction for Car Loan Interest Under the One, Big, Beautiful Bill
2
Office of the Law Revision Counsel. 26 USC 163 – Interest
3
Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
4
Federal Register. Car Loan Interest Deduction
5
United States Committee on Ways and Means. Chairman Smith: Taxpayers Benefit from No Tax on Auto Loan Interest for Made-in-America Cars
6
Internal Revenue Service. 2025 Schedule 1-A (Form 1040)
7
Internal Revenue Service. Form 1098-VLI