USA CAR Act
The USA CAR Act would create a new above-the-line deduction for a specific type of auto loan interest. It amends the tax code to allow individuals (non-corporate taxpayers) to claim as an above-the-line deduction (i.e., it reduces adjusted gross income) the portion of their interest deduction under section 163 that is attributable to “qualified automobile interest.” A “qualified automobile interest” is interest paid or accrued in connection with debt incurred to buy a “qualified automobile” whose final assembly occurred in the United States. The deduction applies to debt incurred on or after the enactment date (i.e., for loans taken out after the bill becomes law). The intention is to encourage U.S.-made vehicles and support domestic auto assembly by providing tax relief on auto loan interest.
Key Points
- 1Adds a new category to the interest deduction: “qualified automobile interest,” defined to apply to debt incurred to acquire a qualified automobile and secured by that automobile, with the debt incurred on or after January 1, 2025.
- 2Defines a “qualified automobile” as a vehicle whose final assembly occurs in the United States, using the framework and definitions from the Automobile Information Disclosure Act (15 U.S.C. 1231). Final assembly is described as the last manufacturing step where the vehicle is completed and delivered to a dealer, including any components necessary for operation.
- 3The deduction for qualified automobile interest is treated as part of the itemized deduction pool under section 163, but for individuals it is claimed above the line under section 62(a) as paragraph (22), meaning it reduces adjusted gross income rather than just itemizing.
- 4Applies only to individuals (non-corporations); corporations are not eligible for this above-the-line treatment.
- 5Effective date: the provisions apply to amounts paid or accrued on indebtedness incurred on or after the date of enactment of the Act.