Senate GOP Tax Bill Offers Car Loan Interest Deduction, Excludes Used Vehicles

Senate Republicans on Monday unveiled a sweeping multitrillion-dollar tax proposal that includes a provision to allow taxpayers to deduct auto loan interest from their taxable income — but only for new vehicles.

The measure, introduced by the Senate Finance Committee, is part of a broader domestic policy package GOP lawmakers hope to deliver to President Trump by July 4. The Senate bill mirrors some provisions in the House’s “One Big Beautiful Bill Act,” passed in May, but diverges on key points related to auto loan interest deductions.

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Under the Senate proposal, taxpayers could deduct up to $10,000 annually in auto loan interest from 2025 through 2028. However, tax experts say the bill appears to exclude used vehicles by requiring that the deduction apply only to vehicles for which “the original use ... commences with the taxpayer.”

“They don’t say the word ‘new cars’ but I don’t see another way of interpreting that language,” said Matt Gardner, senior fellow at the Institute on Taxation and Economic Policy.

Eligible vehicles must be U.S.-assembled and include cars, vans, SUVs, pickup trucks, and motorcycles for personal use. The deduction excludes ATVs, trailers, and campers — categories included in the House version. Only loans secured after December 31, 2024, and the first loan on the vehicle qualify.

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The policy could disproportionately benefit higher-income households. While 61% of low- and middle-income families purchased used cars, only new-car buyers would qualify under the Senate plan. Deductions also diminish for individuals earning over $100,000 and couples over $200,000 annually.

Tax Foundation chief economist William McBride said the biggest difference from the House version is its move “to prevent loans against used cars.” Economic analysts warn that 25% tariffs on imported vehicles and parts may offset the deduction’s intended financial relief.