Tax break for car buyers—but only if you buy American-made.
S. 1653 — USA CAR Act · Filed by Bernie Moreno (R-OH) · Introduced May 7, 2025 · Referred to committee
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What it does
This bill allows individual taxpayers to deduct interest paid on car loans as a direct reduction in taxable income (an 'above-the-line' deduction), but only for vehicles assembled in the United States and purchased after January 1, 2025. The deduction applies to the interest portion of the loan, not the principal, and is available to individuals but not corporations.
Why we flagged it
The bill's core mechanism is a straightforward tax deduction for car-loan interest, conditioned on domestic assembly. It is not hidden or misdirected—the title and operative text align. The bill is a tax expenditure (foregone revenue) that benefits car buyers and, indirectly, domestic automakers.
What the text implies
- The above-the-line deduction is more valuable to higher-income taxpayers (who face higher marginal tax rates), making the benefit regressive despite the universal eligibility language.
- The domestic-assembly requirement may increase vehicle prices by restricting supply to U.S.-made models and reducing consumer choice, offsetting some tax savings for buyers.
The full analysis lists 4 implications of this text.
Who stands to gain
U.S. automobile manufacturers (domestic assembly requirement favors them); Domestic auto dealers (increased sales incentive from tax deduction); Auto financing companies and banks (increased loan origination from deduction incentive)