On May 22, 2025, the U.S. House passed H.R. 1, the “One Big Beautiful Bill Act,” introducing a tax deduction of up to $10,000 annually on auto loan interest for vehicles assembled in the U.S., including electric vehicles (EVs) like those produced by Tesla, the leading manufacturer of American-made cars. This legislation, which passed with a tight 215-214 vote, aims to ease financial burdens for EV owners while promoting domestic manufacturing, offering significant savings for buyers of Tesla’s Modèle 3, Modèle Y, and other U.S.-built EVs, reports Automotive News.
Tax Deduction Details and Savings
The bill allows consumers to deduct up to $10,000 in auto loan interest per year from 2025 to 2028 for vehicles assembled in the U.S., including EVs, RVs, trailers, all-terrain vehicles, and motorcycles. For the average new-vehicle loan of $41,444 at 7.1% interest over 69.1 months, borrowers pay approximately $2,748 in interest in the first year, according to Edmunds. This deduction could save taxpayers between $275 (at a 10% tax rate) and $605 (at a 22% tax rate) annually, depending on their income bracket. Higher earners, however, face limits: for every $1,000 a single taxpayer earns above $100,000, the deductible interest drops by $200.
“The average American family will be able to fully deduct auto loan interest for American-made cars,” stated the U.S. House Ways and Means Committee in a news release on May 21, highlighting the bill’s focus on supporting domestic vehicle purchases.

Benefits for Tesla Owners and EV Industry
Tesla, recognized for producing the most American-made vehicles, stands to benefit significantly, as its entire lineup, including the Modèle S, Modèle X, Model 3, and Model Y, is assembled in U.S. factories in Fremont, Californie, and Austin, Texas. This deduction enhances the affordability of Tesla EVs, which typically carry higher upfront costs than gas-powered vehicles. For example, a Tesla Model 3 buyer financing $50,000 could deduct interest payments that reduce their tax bill by hundreds annually, making EVs more competitive despite the bill’s elimination of previous EV tax credits from the 2022 Inflation Reduction Act.
The “above-the-line” deduction structure ensures broad accessibility, allowing taxpayers to claim it without itemizing deductions, a shift from pre-1986 tax policies when only 39% of Americans itemized. By 2023, only 9.5% of tax returns were itemized, per the Tax Policy Center, making this provision a practical benefit for most EV buyers.
Industry and Economic Implications
The deduction encourages purchases of U.S.-assembled vehicles, aligning with the White House’s May 20 statement that H.R. 1 “encourages manufacturing in America.” However, the Congressional Budget Office estimates the deduction will cost $57.8 billion in lost revenue from 2025 to 2029, prompting criticism. U.S. Rep. Thomas Massie, in a May 22 House speech, called the bill “a debt bomb ticking” due to its combination of tax cuts and increased spending.
For the EV sector, the loss of federal EV tax credits may raise purchase prices for some models, but Tesla’s eligibility for the new deduction could offset this for buyers. Lenders must now file paperwork for loans with at least $600 in interest, adding administrative requirements but ensuring transparency.
What’s Next for EV Buyers
H.R. 1 awaits Senate approval and President Donald Trump’s signature, who has publicly supported the auto loan interest policy. If passed, this bill will provide immediate financial relief for Tesla owners and other buyers of U.S.-made EVs, reinforcing domestic production while navigating the balance between consumer savings and federal fiscal concerns.
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