By Dallas Gagnon
masslive.com
(TNS)
The IRS and U.S. Treasury just rolled out official guidance on a brand-new tax deduction that could save car buyers up to $10,000 in 2026.
The guidance applies to the recently approved “no tax on car loan interest” provision under the One Big Beautiful Bill Act.
It applies to interest paid on vehicle loans for new, made-in-America cars purchased for personal use after Dec. 31, 2024.
The new guidance outlines how the provision will work for taxpayers and lenders, including key transition rules for 2025 as the program launches.
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What to know about the provision
Whether car buyers take the standard deduction or itemize, this is an opportunity to cut their taxable income by deducting loan interest—up to $10,000 per year.
According to the IRS, eligible vehicles include cars, SUVs, vans, pickups and motorcycles weighing under 14,000 pounds, so long as final assembly occurred in the U.S.
The deduction applies for tax years beginning after Dec. 31, 2024, and before Jan. 1, 2029.
Taxpayers may be able to deduct up to $10,000 of their car loan interest under the policy change, but there are some important caveats:
- The policy only covers new, American-made cars—meaning the vehicle’s final assembly must be in the U.S.
- When filing for this deduction, taxpayers should ensure their bank properly reports interest so they can claim the deduction correctly.
The IRS is accepting public comments about how the law is applied through Regulations.gov through Feb. 2, 2026.
Photo credit: LPETTET/iStock
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Kim Armes January 5 2026 at 12:16 pm
How does this new regulation "save a car buyer" $10,000? The law allows a taxpayer who buys a qualifying car with a loan to reduce taxable income by $10,000 which saves them a fraction of that amount on their tax liability. The taxpayer is still paying the $10,000 to a lender. The headline on this article is very misleading.