This is a new benefit that replaced the old purchase credit. Starting in 2025 and running through 2028, buyers who finance an American-assembled EV can deduct up to $10,000 per year in loan interest from their taxable income.
Unlike a tax credit, which reduces your tax bill dollar for dollar, this is a deduction. It lowers your taxable income, so your actual savings depend on your tax bracket. For example, someone in the 22% bracket deducting the full $10,000 would save around $2,200.
Key requirements:
- The vehicle must be assembled in the United States
- You must have a loan; this doesn’t apply to leases or cash purchases
- Available annually through 2028
- Can potentially be combined with the home charger credit if installed before its deadline
Official guidance: IRS OBBBA FAQs
💡 Want to see how this deduction affects total ownership cost? Try our EV vs Gas Calculator.