Electric vehicles sit at the center of one of the most confusing parts of the new auto loan interest deduction. Buyers assume that because EVs are new vehicles, they automatically qualify. That assumption is wrong often enough to matter.
The EV auto loan deduction follows the same rules as any other new vehicle - but one requirement trips up more EV buyers than any other part of the law. Where your vehicle was assembled determines whether you get the deduction. And for many popular EV models, the answer is more complicated than the window sticker suggests.
This article walks through exactly when an EV qualifies, how to verify assembly location before or after you buy, and what your loan documents need to show to support the deduction at tax time.
The Core Rule: EVs Are Not Automatically Exempt or Automatically Included
The auto loan interest deduction under the One Big Beautiful Bill Act does not treat electric vehicles differently from gas-powered ones. An EV is simply a new vehicle. It qualifies or does not qualify based on the same criteria every new car must meet.
Those criteria are:
- New vehicle at the time of purchase - not used or certified pre-owned
- Final assembly completed in the United States
- Purchase price within IRS caps for the vehicle class
- Purchased between 2025 and 2028
- Used for personal transportation, not commercial or business purposes
- Financed with a qualifying loan that generates interest reported on Form 1098-VLI
An EV that meets all six conditions produces deductible interest. An EV that misses even one - particularly the assembly requirement - does not.
Tax disclaimer: This article provides educational information about the EV auto loan deduction. It is not tax advice. Consult a licensed tax professional for guidance specific to your situation.
Why the Assembly Rule Catches EV Buyers Off Guard
The final assembly requirement exists because the law was written to support American manufacturing. Congress tied the deduction to vehicles built on US soil, not just vehicles sold in the US market.
This creates a real problem for EV buyers because the electric vehicle supply chain is global. Battery cells, drive components, and final assembly steps happen across multiple countries for many popular models. A vehicle sold by an American brand and marketed heavily to American consumers may have its final assembly completed in Germany, Mexico, or Canada.
The VIN tells the story. Every vehicle identification number contains a country-of-origin code in its first character. A VIN starting with 1, 4, or 5 indicates US final assembly. A VIN starting with 2 indicates Canada. A VIN starting with 3 indicates Mexico. Any other first character points outside North America entirely.
But here is where it gets more complicated. Some manufacturers build the same model in multiple plants - including US plants. A Tesla Model 3 assembled in Fremont, California qualifies. The same model assembled in Shanghai does not. Two identical-looking vehicles with different VINs can land on opposite sides of the qualification line.
Knowing your specific VIN matters more than knowing your brand or model.
How to Verify Assembly Location Using Your VIN
The National Highway Traffic Safety Administration maintains a free public database that decodes VINs and returns detailed manufacturing information. This is the tool to use.
Step 1 - Locate your VIN. Your VIN appears in several places: the driver's side dashboard visible through the windshield, the driver's side door jamb sticker, your vehicle title, your loan documents, and your insurance card. It is always 17 characters.
Step 2 - Go to the NHTSA VIN decoder. Visit NHTSA official decoder. Enter your full 17-character VIN and run the decode.
Step 3 - Find the plant information in the results. The decoder returns a detailed breakdown of your vehicle. Look for the fields labeled "Plant City," "Plant Country," and "Manufacturer." These fields confirm where final assembly occurred.
Step 4 - Confirm US final assembly. The plant country field should read "United States" for your vehicle to meet the requirement. If it reads Canada, Mexico, Germany, South Korea, or any other country, your vehicle does not qualify for the deduction regardless of brand, price, or loan type.
Step 5 - Screenshot and save the result. If your vehicle qualifies, save the NHTSA decoder result as documentation. You will not need to submit it with your tax return, but having it on file protects you if your return is ever reviewed.
If you have not purchased yet, you can run this check on any vehicle you are considering by asking the dealer for the VIN before signing. Dealers have the VIN available before delivery and most will share it without hesitation. Running it takes two minutes and answers the assembly question before you commit.
EV Models and Assembly Location - What the Data Shows
Assembly location varies by model year, trim level, and production run. No permanent list covers every situation because manufacturers shift production between plants over time. What was built in Germany last year may shift to a US plant this year, or the reverse.
That said, some broad patterns hold as of recent production data:
Vehicles with documented US final assembly for many trims:
- Tesla Model 3 (Fremont, CA - verify by trim and year)
- Tesla Model Y (Fremont, CA and Austin, TX - verify by trim and year)
- Ford Mustang Mach-E (some trims - verify)
- Rivian R1T and R1S (Normal, IL)
- Cadillac Lyriq (Spring Hill, TN)
Vehicles with assembly outside the US for many or all trims:
- BMW iX (Dingolfing, Germany)
- Hyundai IONIQ 5 and IONIQ 6 (Ulsan, South Korea - though US plant opening may affect future production)
- Kia EV6 (Hwaseong, South Korea)
- Volkswagen ID.4 (some trims assembled in Chattanooga, TN - verify)
- Volvo EX90 (verify by production run)
This list is illustrative, not definitive. Production shifts happen. The only reliable method is the NHTSA decoder on your specific VIN.
What Your Loan Documents Need to Show
Assembly location qualifies your vehicle. Your loan documents qualify your interest. Both sides have to check out for the deduction to work.
For the loan side, you need:
A loan on a new vehicle purchase. The loan must have been originated to finance the purchase of the qualifying vehicle. A lease does not qualify. A personal loan used to buy a car does not qualify in the same way as a direct auto purchase loan - the loan purpose and structure matter.
Form 1098-VLI from your lender. This is the form lenders issue to report qualifying auto loan interest. It works like a mortgage interest statement - it shows what you paid during the year. Without this form, you have no IRS-recognized documentation of the interest amount. Before you finance, ask your lender directly whether they issue Form 1098-VLI for qualifying purchases. Most major banks and credit unions handling new vehicle loans will. Some smaller lenders may not yet have this reporting set up.
Interest paid during the tax year. The deduction applies to interest actually paid, not principal. The amount on Form 1098-VLI is what you put on your return. If you made 12 payments, each containing an interest component, the form totals those payments and reports the qualifying amount.
Your MAGI within the income thresholds. For single filers, MAGI must be at or below $150,000 for any deduction. For married filing jointly, the threshold is $250,000. Above those numbers, the deduction does not apply regardless of vehicle or loan qualification.
The Purchase Price Cap and Where EVs Often Run Into It
The law sets purchase price caps based on vehicle class. Sedans, SUVs, trucks, and vans each have their own limit. These caps matter for EV buyers because electric vehicles often carry higher base prices than comparable gas-powered models.
A $72,000 electric SUV may exceed the cap for its vehicle class even if it meets every other qualification requirement. The deduction does not apply to any vehicle purchased above the IRS cap for that class.
The IRS will publish official cap figures for each tax year. Check IRS.gov for current guidance on purchase price limits by vehicle type before assuming your EV falls within range. If the dealer's out-the-door price - including documentation fees but typically excluding sales tax - lands above the cap, you do not have a deduction to claim regardless of how the loan is structured.
Three Steps to Take Right Now
Whether you already own an EV or are actively shopping for one, these three steps put you in the best position for the deduction.
If you already own a qualifying EV:
Run your VIN through the NHTSA decoder today and save the result. Then pull your most recent loan statement and confirm your lender issues Form 1098-VLI. If they do not, contact your lender directly and ask what reporting they provide for auto loan interest on new vehicle purchases. Knowing this now means no surprises when you file.
If you are shopping for an EV:
Ask every dealer for the VIN before you sign. Run it through the NHTSA decoder before you commit. If the assembly location does not qualify, ask whether other units on the lot or incoming inventory were built at a US plant. VINs differ vehicle to vehicle. One unit on the lot may qualify while another identical-looking model does not.
If you are deciding between an EV and a gas vehicle:
Assembly location affects both equally. A gas-powered vehicle assembled outside the US fails the requirement just like an EV assembled overseas. The EV label does not add or subtract from the qualification criteria. Run the same VIN check on any vehicle you are considering, regardless of powertrain.
What Qualifies Is Simpler Than It Sounds
The EV auto loan deduction does not require special EV-specific knowledge. It requires the same checks every new vehicle buyer should run.
Confirm US final assembly using the NHTSA VIN decoder. Confirm the purchase price falls within the IRS cap for your vehicle class. Confirm your lender issues Form 1098-VLI. Confirm your MAGI falls within the income threshold for your filing status.
Four checks. Two minutes each. The result tells you whether the interest you are paying on your EV loan is working for you at tax time - or just working for your lender.
This article is for educational purposes only and does not constitute tax advice. Tax laws are subject to change and are subject to IRS interpretation. Consult a licensed tax professional before making decisions based on your individual tax situation.
