The New “Big Beautiful Bill” and Your Car Purchase: Will You Get a Vehicle Loan Tax Credit?

Washington State car shoppers may have heard about Congress passing a “Big, Beautiful Bill” on July 3, 2025 and signed into law by President Trump on July 4th, 2025 – a sweeping tax and spending package. One exciting piece of this legislation for car buyers is a new vehicle loan interest tax break (sometimes casually called a Vehicle Loan Tax Credit). As well as an increased SALT (State & Local Tax) deduction. Combined, these two tax breaks could potentialy be a huge win for Washington Ford shoppers. Below we break down what this could mean for your next car purchase, when it might take effect, and what Ford models are likely to qualify – all with the caveat that details are still being finalized and some informed speculation is involved.

What Is the New Vehicle Loan Interest Tax Deduction?

One major consumer-friendly provision in the bill is a temporary tax deduction for auto loan interest. In other words, if you finance a vehicle, the interest you pay on your car loan could become tax-deductible under this new law. The legislation “adds new tax deductions on tips, overtime and auto loans” for individuals – the auto loans piece is the one that can directly benefit car buyers.

For working families, this is a big deal. It means you might be able to write off the interest portion of your car payments at tax time, potentially lowering your federal tax bill. This would be a new benefit; currently, interest on personal auto loans is not tax-deductible for most consumers. Lawmakers included this deduction to ease the tax burden on middle-class households making big purchases. Think of it as a boost for car buyers, making financing a new vehicle a bit more affordable over the life of the loan.

Important: This is structured as a tax deduction, not a direct rebate at the time of purchase. That means it would reduce your taxable income (resulting in tax savings when you file), rather than an upfront discount. It’s sometimes informally referred to as a “tax credit,” but technically it operates by letting you deduct your car loan interest from your income before taxes.

When Would This Tax Break Take Effect?

The exact start date of the vehicle loan interest deduction isn’t yet confirmed, but it’s expected to kick in soon. Many provisions in the bill are set to take effect either immediately or retroactively to the beginning of 2025. In plain terms, that suggests interest paid on auto loans in 2025 and beyond would likely qualify. If you finance a car in 2025, you could see the benefit when filing your 2025 taxes. It’s even appears the deduction will apply to interest from loans taken out earlier in 2025, since the bill’s changes may be retroactive to Jan 1, 2025 – but we’ll need official IRS guidance to know for sure.

Keep in mind this new tax perk is temporary. Lawmakers have framed it as a trial boost for the middle class. The bill “temporarily adds” these deductions, which implies they will expire after a few years unless extended. Early proposals indicated the auto loan interest deduction might be available through 2028. So there could be a window of a few years where buying a car and financing it yields this extra tax benefit. Again, we await final confirmation, but the prudent approach is to assume this deduction is available for the 2025–2028 tax years (approximately) and plan accordingly.

Which Vehicles Could Qualify for the Tax Credit?

Another question on local buyers’ minds: Will all cars qualify, or only certain ones? The text of the House’s initial bill suggested some conditions for this auto loan interest deduction. Notably, it hinted that only new vehicles assembled in the United States would be eligible, and it included an income cap . These conditions were aimed at focusing the benefit on domestically-produced cars and middle-income buyers.

While the final bill’s exact language may differ, it’s wise to assume qualifying vehicles will likely be new cars/trucks built in the USA. That’s great news for Ford shoppers here in Washington, because many popular Ford models are American-built. For example, Ford F-Series trucks (like the F-150 and Super Duty), the Ford Bronco, the Explorer and Escape SUVs, and the Ford Mustang coupe are all assembled in the U.S. These models would very likely qualify for the interest deduction under the proposed rules.

On the other hand, models that are imported or built abroad might not qualify. Ford’s Mustang Mach-E, for instance, is built in Mexico and thus may not meet the “U.S.-built” criterion if that ends up in the final law. (We’ll have to see if any exceptions are made or if the requirement is strictly enforced.) The idea is to reward buyers of vehicles that support U.S. manufacturing.

The good news is that most Ford vehicles sold by Bowen Scarff Ford in Kent are U.S.-built, so our customers should have plenty of choices. From the tough F-150 pickup to the popular Explorer SUV and the legendary Mustang, you can likely take advantage of the new loan interest tax break on these purchases.

Ford Models Assembled in the U.S. (2025)

Michigan Assembly Plant – Wayne, MI

Ford Bronco
Ford Ranger

Flat Rock Assembly Plant – Flat Rock, MI

Ford Mustang

Dearborn Truck Plant – Dearborn, MI

Ford F-150
Ford Super Duty (certain trims)

Rouge Electric Vehicle Center – Dearborn, MI

Ford F-150 Lightning

Kansas City Assembly Plant – Claycomo, MO

Ford F-150
Ford Transit (Cargo, Passenger, Cutaway, Chassis Cab)

Chicago Assembly Plant – Chicago, IL

Ford Explorer
Lincoln Aviator

Louisville Assembly Plant – Louisville, KY

Ford Escape
Lincoln Corsair

Kentucky Truck Plant – Louisville, KY

Ford Expedition / Expedition Max
Lincoln Navigator / Navigator L

Ohio Assembly Plant – Avon Lake, OH

Ford Super Duty Chassis Cabs
E-Series Cutaway
Transit Cutaway (certain configurations)

Does the Bill Include a Sales Tax Credit for Vehicle Purchases?

There’s been some confusion around “sales tax” in the bill. The new federal legislation does not directly create a separate sales tax credit for vehicle purchases. In other words, you won’t get a new federal rebate or credit specifically for the sales tax you pay on a car. However, there is an indirect benefit: the bill raises the cap on state and local tax deductions (the SALT deduction) from $10,000 to $40,000 for the next five years.

What does that mean in plain English? If you itemize deductions on your federal return, you can deduct state sales tax you paid (or state income tax, but Washington has no income tax) up to that higher $40k limit. This higher cap could especially help those who make a big purchase like a car in a high-sales-tax area like Puget Sound. Washington’s sales tax is around 10.5%, so buying a car can mean thousands in sales tax. Under the new SALT limit, more of that sales tax could be deducted for some taxpayers than was allowed under the old $10k cap.

However, note that this SALT deduction mainly benefits higher-income itemizing taxpayers; it’s not a straightforward instant rebate on your car purchase. For the average buyer, the major new benefit from the bill is still the auto loan interest deduction discussed above.

A Note on Speculation and Final Details

As of this writing, the “Big Beautiful Bill” has passed the House and Senate and is expected to be signed by the President soon. The broad strokes – like the auto loan interest deduction – are known, but the fine details are not yet fully published. IRS rules and guidance will clarify exactly how you can claim the deduction, which vehicles and loans qualify, and any income phase-outs. Our insights above are based on the best available information from the House-passed bill and expert analyses, but some aspects could change.

We want to keep you informed but also urge caution. It’s wise to start planning your next car purchase with these potential tax savings in mind, but don’t count your chickens before they hatch. We at Bowen Scarff Ford are closely monitoring the final provisions. We’re here to help our customers navigate these new incentives once everything is official. Feel free to reach out to our team – we’ll happily share the latest updates and help you understand how this new law could benefit you when buying your next Ford.

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