- Tax you still pay $0
- Tax you save $0
- Without deduction $0
| Interest paid in the tax year | $0 |
| Cap | $10,000 |
| Phase-out reduction | $0 |
| Deduction on Schedule 1-A | $0 |
How the car loan interest deduction works
For tax years 2025 through 2028, you can deduct interest on a loan used to buy a qualifying new passenger vehicle for personal use, whether you itemize or take the standard deduction. You must put the vehicle's VIN on your return.
Which cars qualify
- New (the original use starts with you); used vehicles don't qualify.
- A car, minivan, van, SUV, pickup truck or motorcycle under 14,000 lbs.
- Final assembly in the United States, shown on the window sticker or by the VIN's plant code.
- Bought with a loan taken out after December 31, 2024 and secured by the vehicle. Leases don't qualify; a refinanced qualifying loan generally does.
The formula
- Interest paid during the year, up to $10,000.
- Minus $200 for each $1,000 (or part of $1,000) of MAGI over $100,000 ($200,000 joint).
Example
A single buyer finances $40,000 at 7% for 60 months in March 2026. Interest paid from April to December 2026 is about $1,981. With MAGI of $90,000, the whole amount is deductible, saving about $436 in the 22% bracket.
Frequently asked questions
How much car loan interest can I deduct?
Up to $10,000 of interest per year, for tax years 2025 through 2028.
Does a used car qualify?
No. The vehicle must be new, meaning the original use starts with you.
How do I know if my car had final assembly in the US?
Check the window sticker (Monroney label), which lists the final assembly point, or decode the VIN: its plant code shows where the car was built.
What is the income limit?
The deduction is reduced by $200 for each $1,000 of modified AGI over $100,000 ($200,000 joint). A full $10,000 deduction is gone at $150,000 single or $250,000 joint.
Do leases qualify?
No. Only interest on a purchase loan secured by the vehicle counts. Refinancing a qualifying loan generally keeps it eligible.
Can married people filing separately claim it?
Yes. Unlike the tips, overtime and senior deductions, the car loan interest deduction does not require a joint return.
Related calculators
Sources
- IRS Fact Sheet FS-2025-03: tax deductions for working Americans and seniors
- IRS: tax year 2026 inflation adjustments (brackets and standard deduction)
- IRS: One, Big, Beautiful Bill provisions for individuals and workers
This calculator gives an estimate of federal income tax only, using IRS figures for tax years 2025 and 2026. It does not cover state tax, Social Security or Medicare tax, credits, or every rule on Schedule 1-A. It is not tax advice; check your return with tax software or a tax professional.