President Donald Trump’s new tax-cut law now allows a tax deduction for interest on vehicle loans, not just home loans. The deduction applies to new vehicles assembled in the U.S. and issued loans starting this year, offering savings up to $10,000 annually from 2025-2028.

Buyers with incomes between $100,000 and $150,000 ($200,000-$250,000 joint) can claim the tax break, benefiting millions. Last year, U.S. auto dealers sold 15.9 million new light vehicles, with around 60% financed by loans. An estimated 3.5 million new vehicle loans are eligible this year.

The tax break applies to vehicles assembled in the U.S., regardless of the automaker’s headquarters. Different models may qualify, like Ford’s Mustang being made in Michigan but Mustang Mach-E in Mexico. General Motors assembles Cadillacs in the U.S., but only 44% of Chevrolets sold last year were made in the country.

The average new vehicle loan is about $44,000 over six years, offering potential tax savings of about $2,200 over four years. The deduction can also reduce state income taxes, benefiting all taxpayers, even those claiming the standard deduction. The impact on boosting vehicle sales remains uncertain, with some expressing skepticism.

Read more at Yahoo Finance: New tax break for auto loans could save some buyers thousands of dollars. But will it boost sales?