As part of the recently passed “One, Big, Beautiful Bill Act,” drivers now have the opportunity to take advantage of a new car interest tax deduction designed to help ease the cost of vehicle ownership. This deduction allows qualifying buyers to write off interest paid on certain auto loans, potentially leading to significant savings come tax season.
The new “No Tax on Car Loan Interest” provision offers drivers a valuable tax break beginning in 2025 and lasting through 2028. During this period, individuals may deduct up to $10,000 annually in interest paid on qualifying car loans, with the deduction phasing out for those with higher incomes ($100,000 for single filers, $200,000 for joint filers). This benefit applies whether or not you itemize deductions, and lenders will be required to provide annual statements reporting the total interest paid. To claim the deduction, taxpayers must include the Vehicle Identification Number (VIN) of the qualifying vehicle on their return, and the IRS has announced transition relief for reporting in the 2025 tax year.
The more difficult part of the “No Tax on Car Loan Interest” provision, is what actually makes a vehicle eligible. To qualify, the loan must be for the purchase of a brand-new personal use vehicle — used cars and leases don’t make the cut. The vehicle must also be secured by a lien and be one whose original use begins with the taxpayer. In addition, only certain types of vehicles qualify, including cars, minivans, vans, SUVs, pickup trucks, and motorcycles, as long as they weigh less than 14,000 pounds.
Final Assembly: Same Model, Different Origin
However, it gets a little more complicated, and perhaps the most specific requirement is that the vehicle must have undergone final assembly in the United States.
This requirement is most difficult for automakers and dealerships to communicate to shoppers, as there are factories both within and outside of the US that produce the same vehicle models.
Take, for example, the 2025 Chevrolet Silverado. Depending on whether you’re looking at a 1500 or an HD, and considering the cab size, this truck could have arrived to your local dealership from the GM Flint assembly plant in Michigan, the GM Fort Wayne plant in Indiana, or from the Navistar factory in Ohio (if you’re considering a Silverado MD). But not all Silverado’s are produced in the United States — GM also operates the Silao plant out of Mexico, and to make matters even more confusing, a portion of 2026 Silverado inventory will have been assembled in GM’s Oshawa facility in Ontario, Canada. The Silverado is just one example of automakers sourcing vehicles from multiple countries, and this can understandably spark confusion when considering the new car interest tax deduction.
How to Determine Vehicle Eligibility
Vehicles assembled in Canada and Mexico will NOT be eligible under the “No Tax on Car Loan Interest” provision. Luckily, there is a rather easy way to tell if a vehicle you are interested in purchasing has undergone final assembly in the US, and it is the very first digit in the vehicles VIN.
If a VIN starts with “1, 4 or 5,” it has undergone final assembly in a factory within the US. It’s that simple!
But here at Chevrolet Buick GMC of Puyallup, we strive to make your car shopping experience as easy as possible. To make this even simpler for our customers, we have compiled a list of vehicles that MAY qualify for the car loan interest deduction. Remember, it is important to check the VIN number of the specific vehicle you’re considering to ensure it is eligible.
Chevrolet Vehicles
- Silverado LD/HD
- Silverado EV
- Suburban
- Colorado
- Traverse
GMC Vehicles
- Sierra LD/HD
- Sierra EV
- Yukon and Yukon XL
- Canyon
- Acadia
And to be abundantly clear, we do not offer this list as the end-all-be-all for whether a vehicle qualifies. Referencing our example using the Silverado, each vehicle on our lot must be individually-verified as being assembled in the US.
A tool we recommend is the NHTSA Vin Decoder. It provides a mountain of information concerning any vehicle you may be interested in, and more pertinent to what we’ve discussed in this blog post, it can tell you exactly which factory a vehicle was assembled in.
We hope this information makes you feel more confident in your vehicle research! Ready to take the next step? Visit our dealership to test drive our massive inventory of cars, trucks and SUVs. We’re excited to work with you!
DISCLAIMER: This information does not constitute tax, accounting, or legal advice. Deduction subject to federal laws and regulations and manufacturing constraints, and may change after the time of this writing. For questions regarding the No Tax on Car Loan Interest provision or any material discussed in this blog, reach out to an accountant or legal expert.
