Trump's New Tax Plan Could Save Americans Hundreds on Car Loan Interest
A new tax policy proposal from President Trump aims to allow car buyers to deduct auto loan interest from their federal taxes—but only for vehicles manufactured in the United States.
The policy, discussed with Republican lawmakers including Senator John Thune and Representative Mike Johnson, has two main objectives: boosting American manufacturing employment and providing financial relief to middle-class consumers facing high auto loan rates.
Tweet from Charlie Kirk about Trump's car loan policy
How the Deduction Would Work:
- Only applies to vehicles assembled in the U.S.
- Interest from monthly car loan payments becomes tax-deductible
- Does not apply to imported vehicles
- Could save buyers hundreds of dollars annually
Example Savings: For a $35,000 U.S.-made vehicle financed at 7% interest over five years, buyers could deduct approximately $1,500–$2,000 in interest payments throughout the loan term.
Key Considerations:
- Requires clear definition of "U.S.-made" vehicles
- Many foreign automakers assemble cars in U.S. factories
- Some American brands manufacture overseas
- Benefits may vary by income level
- Higher-income buyers with larger loans could see greater benefits
- Impact on lower-income buyers depends on taxable income and filing status
Current Status: The proposal remains pending and would need Congressional approval as part of a broader tax package. No formal bill has been introduced yet, but it signals a potential shift toward incentivizing American-made product purchases through tax policy.
This policy would mark a return to pre-1986 tax practices when consumer interest deductions were more widely available before most non-mortgage interest write-offs were eliminated.