Fewer than 1% Will Receive the Complete Car Loan Tax Deduction from Trump | Carscoops

      Average consumers may only see savings of around $500 from the new legislation.

      6 hours ago

      by Brad Anderson

      Only 1% of all new car loans have annual interest payments exceeding $10,000.

      The benefits of the tax deduction decrease for individuals earning over $100,000.

      To qualify for the benefit, all new vehicles must be manufactured in the United States.

      US car buyers with loans might save thousands by deducting auto loan interest from their taxable income. While the new legislation markets tax deductions of up to $10,000 on annual interest, it appears that only a small percentage of drivers will be able to achieve such savings. With price increases driven by tariffs, many consumers may actually end up worse off.

      

      The tax break included in the Trump administration’s One Big Beautiful Bill Act will remain in effect until the end of 2028. Although it offers a tax deduction of up to $10,000, Cox Automotive observes that such high interest charges on auto loans are quite rare, mostly affecting luxury vehicles. These represent only about 1% of all new car loans.

      According to Jonathan Smoke from Cox Automotive, a loan of around $112,000 would be necessary to utilize the full $10,000 deduction. This year, the average car loan in the US stands at approximately $43,000. Loans exceeding $100,000 generally belong to brands like Mercedes-Benz, Maserati, Aston Martin, Lamborghini, McLaren, and Porsche.

      These calculations are based on a 72-month loan at an interest rate of about 9.5%, assuming a 10% down payment, and suggest a purchase price near $130,000. Besides needing a loan for a high-end vehicle to benefit, buyers’ incomes must also be under a certain limit.

      A Tax Break…Of Sorts

      As reported by CNBC, for every $1,000 in income above $100,000 for individuals or $200,000 for joint filers, the value of the deduction decreases by $200. Thus, individuals or couples earning less than these thresholds probably won’t be considering loans for vehicles priced above $130,000. Furthermore, there’s no tax advantage for individuals earning over $150,000 or couples making more than $250,000.

      Additionally, to qualify, the vehicles must be new and produced in the United States, which significantly limits the selection of eligible models.

      Smoke suggests that the average buyer would receive a tax deduction of about $3,000 in the first year of a six-year loan and a $2,000 deduction in the following years. In most cases, this will lead to a reduction in consumers’ tax bills by $500 or less during the first year.