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Tax years 2025 to 2028 · last checked Oct 22, 2026
Car loan interest deduction: who it covers, limits and how to claim it
Deduct up to $10,000 a year of interest on a loan for a new, U.S.-assembled personal vehicle.
Check the rules for your situation
Answer a few quick questions to see which official rules may apply and an estimated deduction range.
Open the car loan interest deduction checkerKey figures
| Maximum deduction | $10,000 of interest per return, per year |
|---|---|
| Phase-out starts | Modified AGI over $100,000 ($200,000 joint) |
| Phase-out rate | $200 less for each $1,000 (or part of $1,000) over the limit |
| Vehicle | New, final assembly in the U.S., under 14,000 lbs GVWR |
| Loan | Taken out after Dec 31, 2024, secured by a first lien |
| Tax years | 2025, 2026, 2027 and 2028 |
| Who reports it | Form 1040, Schedule 1-A, Part IV (VIN required) |
Who it covers
You may be able to deduct interest on a car loan if all of these are true:
- The loan was taken out after December 31, 2024 to buy the vehicle.
- The vehicle is new: its original use started with you. Used vehicles do not count.
- It is a car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds.
- Its final assembly happened in the United States.
- You bought it for personal use. The final rules look at whether you expect personal use more than 50% of the time.
- The loan is secured by a first lien on the vehicle.
Leases do not count. Loans from a related person do not count. If you later refinance a qualifying loan, interest on the refinanced amount generally still counts.
Caps and income phase-outs
You can deduct up to $10,000 of qualified interest a year. That cap is per return, even if you have two vehicles.
The deduction shrinks once modified AGI goes over $100,000 ($200,000 joint). It drops by $200 for each $1,000, or part of $1,000, over the limit. Unlike the tips and overtime deductions, a partial $1,000 still counts as a full step.
Example: a single filer paid $2,400 of qualifying interest and has MAGI of $104,500. That is $4,500 over, which rounds up to 5 steps, so the deduction drops by $1,000, to $1,400.
How to claim it
You claim it on Schedule 1-A, Part IV, and you must list the vehicle's VIN on the return every year you claim it. It works whether you itemize or not.
Lenders report the interest you paid. The draft 2026 Schedule 1-A points to the new Form 1098-VLI, box 1. Keep your loan papers and purchase contract.
How to check final assembly: the IRS says you can rely on the plant of manufacture in the VIN, or on the "final assembly point" printed on the vehicle label (window sticker). Try our free VIN lookup, which uses NHTSA data.
Treasury and the IRS issued final regulations (T.D. 10054) on September 8, 2026, effective November 9, 2026. They keep the VIN and window sticker options for proving final assembly.
Check a VIN
Look up where your vehicle was built with free NHTSA data.
Common questions
Can I deduct interest on a used car?
No. The vehicle has to be new, meaning its original use started with you.
Does a lease count?
No. Lease payments do not qualify. Only interest on a loan used to buy the vehicle counts.
How do I know if my car had final assembly in the U.S.?
Check the final assembly point on the window sticker, or the plant of manufacture in the VIN. Our VIN lookup uses the free NHTSA decoder to show the plant location.
Do foreign brands count if built in the U.S.?
The rule is about where final assembly happened, not the brand. A vehicle from any brand can count if its final assembly was in the U.S. and it meets the other rules.
What is the income limit for the car loan deduction?
The deduction starts to phase out at $100,000 of modified AGI ($200,000 joint). It drops by $200 for each $1,000 or part of $1,000 over that.
Can I claim it if I use the truck for work?
The final rules look at whether you expect personal use more than 50% of the time. Business vehicles fall under different rules, so ask a tax professional.
Does refinancing count?
If you refinance a loan that qualified, interest on the refinanced amount generally still counts, up to the balance of the original loan.
Do I need to itemize?
No. It is available whether you itemize or take the standard deduction.