The American Financial Services Association (AFSA) has announced a new tax-deductible auto loan interest provision under the One Big Beautiful Bill, which could enhance consumer financial flexibility and support domestic vehicle sales.
According to AFSA, the One Big Beautiful Bill allows borrowers to deduct up to $10,000 in interest annually on auto loans for new vehicles assembled in the U.S. purchased between 2025 and 2028. The benefit phases out at higher income levels, specifically between $100,000 and $150,000 for single filers and $200,000 to $250,000 for joint filers. The organization notes that this measure would expand consumer financial flexibility and bolster domestic-vehicle financing markets.
The legislative change may impact a large segment of the market. U.S. new light-vehicle sales reached an annualized pace of 16.3 million units in the first half of 2025, with about 60% (nearly 10 million vehicles) assembled domestically. AFSA suggests that aligning tax incentives with vehicle assembly location would incentivize domestic purchases.
Vehicle pricing data from Cox Automotive’s Kelley Blue Book report indicates that the average transaction price for a new vehicle in May 2025 was approximately $48,799. This stability suggests that the deduction may meaningfully offset purchasing costs. Applying AFSA’s loan scenario—10% down, 72-month term at 6.5% interest—a typical borrower could claim around $3,000 in interest deduction in year one, averaging $1,800 annually thereafter under the cap.
Analysis from tax advisory firm Schneider Downs confirms that the bill adds a temporary auto loan interest deduction to the tax code. It allows up to $10,000 in interest claimable for qualifying U.S.-assembled vehicles, with phaseout thresholds matching those noted by AFSA and covering tax years 2025–2028. The firm projects that this measure will reshape consumer tax liabilities alongside expanded state and local taxes (SALT) caps and family tax credits.
The National Law Review reports that the provision applies regardless of whether taxpayers itemize deductions; however, vehicles must meet final assembly requirements in the U.S., and borrowers must be original owners. It also limits eligibility to first financing of such vehicles and excludes recreational vehicles.
AFSA is a national trade association representing consumer credit providers including auto finance, credit cards, and other lending services. It advocates for regulatory and legislative policies affecting small businesses and consumers while monitoring implementation processes for major laws.
A table summarizing key details of the One Big Beautiful Bill follows:
Key Auto Loan Deduction Provisions in the One Big Beautiful Bill (OBBB)
| Item | Details |
|---|---|
| Bill Name | One Big Beautiful Bill (OBBB) |
| Key Provision | Auto loan interest is tax-deductible |
| Eligibility | New vehicles assembled in the U.S. |
| Timeframe | 2025–2028 |
| Deduction Cap | 10000 |
| Income Phase-out (Single) | $100K–$150K |
| Income Phase-out (Joint) | $200K–$250K |
| Example Deduction (Year 1) | ~$3,000 |
| Average Annual Deduction | ~$1,800 |
| Multiple Loans Allowed? | Yes, within $10,000 cap |
