Does the 2026 Tax Deduction for American-Made Vehicles Apply to EVs?

The IRA offers a single tax credit of up to $7,500 for the purchase of EVs and hybrid vehicles, paid at the time of purchase. The new OBBBA tax benefit is a multi-year deduction of up to $10,000 annually that makes the financing of American-made vehicles more affordable.

The $7,500 Point-of-Sale Credit was a feature of the IRA that allowed EV buyers to transfer their federal tax credit directly to a dealership at the time of purchase. Instead of waiting to claim the POS credit on a tax return the following year, the buyer received an instant discount or cash toward their down payment.

This credit effectively reduced the price of an EV by $7,500 on the spot if you met the eligibility requirements (battery, income caps, MSRP limits and North American assembly).  Although the credit provision was replaced on September 30, 2025, applicable EVs purchased on or before that date can still claim the credit “retroactively” on 2025 tax returns (filed in 2026) using IRS Form 8936.

While the credit under the IRA acted as a one-time instant rebate or a dollar-for-dollar reduction of your federal tax bill, the new OBBBA interest deduction is an annual, above-the-line incentive that lowers taxable income by allowing owners to deduct up to $10,000 in loan interest each year through 2028.

The “Car Loan Interest Deduction” applies to qualifying loans that originated between January 1, 2025, and December 31, 2028.  To qualify for the deduction, the vehicle must be made in America, and purchased brand-new, after December 31, 2024.

The deduction is intended for personal use vehicles of middle-income earners. Anyone with a modified adjusted gross income (MAGI) up to $100,000 (Single) or $200,000 (married filing jointly) are eligible for the full deduction. The benefit decreases by $200 for every $1,000 over these limits up to the ceiling of $150,000 (single) or $250,000 (joint).

To qualify under the “made in America” rule, the vehicle must have its final assembly in the United States. The OBBBA encourages domestic manufacturing, so unlike the one-time POS credit under the IRA, the new deduction does not apply to vehicles manufactured in Canada or Mexico and there are no strict battery requirements.

Example: A Ford Mustang Mach-E assembled in Mexico qualified for previous credits, but the interest on its loan is not deductible under the OBBBA because it was not assembled in the U.S. The Tesla Model 3 is assembled in Fremont, California, so it does qualify.

The Monroney sticker

At the dealership you can look for a Monroney sticker on the window of the vehicle, specifically the section titled “Parts Content Information.” It will explicitly state: “Final Assembly Point:” followed by the city and state (e.g., Normal, IL or Austin, TX). For the 2026 deduction, this must be a U.S. location.