A new auto loan tax deduction of up to $10,000 per year, introduced in President Donald Trump’s One Big Beautiful Bill, has sparked excitement among car buyers. But a new study by the auto refinance platform Caribou reveals that 97% of Americans won’t see any savings — and those who do will save just $333 a year on average.
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Here’s a closer look at who actually qualifies for the $10,000 tax break, and why you probably do not.
Who Actually Qualifies for the $10K Auto Loan Deduction
The new deduction comes with strict eligibility requirements that significantly restrict who can benefit:
- Purchase date: The vehicle must have been purchased on or after Jan. 1, 2025.
- U.S. assembly: The car must be for personal use and assembled in the United States.
- Income thresholds: The deduction begins phasing out at a modified adjusted gross income of $100,000 for single filers or $200,000 for joint filers, with no deduction available if your income exceeds $149,000 or $249,000 for joint filers.
“A limited number of Americans will qualify for the tax break primarily due to two factors — the relatively small number of qualifying vehicles available for sale and strict eligibility criteria, such as income thresholds,” said Simon Goodall, CEO of Caribou.
The Caribou study found that about 76% of buyers are ineligible to receive the full deduction because they either exceed income limits or don’t meet other requirements.
“This leaves roughly 2.8 million people — out of approximately 100 million outstanding auto loans — who are actually able to benefit from the tax break,” Goodall said.
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Why Most Qualifying Buyers Won’t Save $10K
Even those who meet the requirements likely won’t see a tax savings of $10,000.
“The $10,000 deduction represents a reduction in taxable income, not a direct tax credit,” Goodall said. “Even if a taxpayer could claim the full $10,000 deduction at a 22% tax rate, the maximum annual tax savings would be about $2,200.”
Furthermore, very few borrowers will receive the full $10,000 deduction due to loan size limits, the structure of the deduction and other loan-related factors such as interest paid, loan terms and phaseouts.
Consequently, the study found that the average realized tax savings over the life of a qualifying loan is approximately $1,904, or around $333 annually.
Is It Worth Buying a Car Just To Get the Tax Break?
If you’re in the market for a new car, you may be wondering if you should factor this tax break into your buying decision — but Goodall said this shouldn’t be a deciding factor.
“For most buyers, it’s not ‘worth it’ to go out of their way to purchase a car just to qualify for this tax break,” he said. “While the deduction sounds significant in headlines, the actual savings for most people are modest and are often outweighed by simply choosing the best car for individual needs.”
Before purchasing, buyers should carefully review the restrictions and calculate their real chance of saving money via the tax break.
“The One Big Beautiful Bill Act deduction is getting a lot of buzz,” Goodall said, “but for the average car buyer, it’s a headline with almost no real-world benefit.”
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This article originally appeared on GOBankingRates.com: Trump’s $10K Car Loan Tax Break Sounds Great — but Most Won’t Qualify
