One of the measures included in the Big Beautiful Bill promoted by President Trump and approved last July 4 in the Senate and in the House of Representatives is the USA Car Act. It provides for the deduction of approximately $10,000 in interest on loans taken out for the purpose of purchasing a U.S.-made vehicle. Bernie Moreno, a Republican senator from Ohio and sponsor of the USA Car Act, argues that it is the best way to ensure that all vehicles sold in the U.S. are domestically produced.
However, the Penn Wharton Budget Model has shown that those whose wages are less than $18,000 will receive even less after taxes, and those families who need SNAP will have an even harder time qualifying, according to the Center on Budget and Policy Priorities. ABC News reported that cars, SUVs, motorcycles, minivans, minivans, vans and pickup trucks would be accepted for depreciation, as long as they weigh less than 14,000 pounds. Cox Automotive chief economist Jonathan Smoke said the net savings for the average buyer is about $22,000. Also, the head of the Greater Cleveland Automobile Dealers Association, Lou Vitantonio, said the new measure “will help the market in the long run”.
Big Beautiful Bill’ and automotive benefits
The “Big Beautiful Bill”, a law proposed by Republican President Donald Trump, includes numerous measures on tax cuts and tax deductions for large fortunes. One of the measures it incorporates, includes the possible deduction of interest generated by loans requested by citizens to buy a new vehicle. This deduction may reach $10,000 per year, as long as the vehicle was manufactured in the United States. This is a boost and a complementary measure to the tariffs imposed by the same government, which makes it more expensive to import vehicles from beyond the country’s borders.
This interest deduction is included in the package, under the name of the USA Car Act. Bernie Moreno, Senator for Ohio and sponsor of the USA Car Act, stated “We are finally making sure that all cars sold in the United States are made in the United States and that working Americans can buy a car in the first place”. And that is the main intention; that citizens should only be able to buy vehicles made in the United States.
Disadvantages of the USA Car Act
As positive as this new measure may sound, the reality is that the “Big Beautiful Bill” enacted by Donald Trump, more than notably decreases the purchasing power of the population. A prime example is Supplemental Nutrition Assistance Program (SNAP) eligibility. According to the Center on Budget and Policy Priorities, 41 million people would benefit from this assistance in 2024. However, this figure may not be repeated given the increasingly strict eligibility criteria due to Trump’s new regulations. In addition, the Penn Wharton Budget Model estimates reflect that those citizens with salaries below $18,000 will end up collecting even less after taxes.
How can this deduction be claimed?
Anyone who purchases a vehicle assembled in the United States, and paid for with a loan from January 1, 2025 through the end of 2028, is potentially eligible for this deduction. ABC News reported that vehicles weighing no more than 14,000 pounds will be accepted, including: cars, motorcycles, SUVs, minivans, vans and pickup trucks. However, the main filter is the total income received by the buyer:
- Income between $100,000 and $150,000 for individuals.
- Income between $200,000 and $250,000 for couples.
If the applicant’s annual income exceeds the limits established for both individuals and couples, they will not be eligible. When can I claim the deduction? You will have to wait for federal returns for tax years 2025, 2026, 2027 and 2028, depending on when the vehicle is purchased.
Actual savings
Cox Automotive chief economist Jonathan Smoke explained that the average U.S. buyer’s net savings is about $2,200 over four years. For his part, Greater Cleveland Automobile Dealers Association chief Lou Vitantonio, “[The tax deduction] will certainly get people moving and it will certainly help the market, I think in the near future”.
