Car loan interest deduction: rules, income limits & how to claim
The 2025 tax law (One Big Beautiful Bill) created a temporary deduction for interest on a new car loan, for tax years 2025 through 2028. Here is who qualifies and how.
How much you can deduct
Up to $10,000 of car loan interest per year. It is an above-the-line deduction, so you can claim it whether or not you itemize.
Vehicle requirement (the big one)
- Final assembly in the United States — this is VIN-specific, not by brand. A “foreign” brand assembled in the U.S. can qualify; a “domestic” brand built abroad may not.
- New vehicle (you must be the first owner). Used and leased vehicles do not qualify.
- Personal use. Gross vehicle weight rating under 14,000 lb.
- Car, minivan, van, SUV, pickup, or motorcycle.
Income limit (MAGI phase-out)
The deduction begins to phase out once modified adjusted gross income (MAGI) exceeds $100,000 for single filers and $200,000 for joint filers, and is reduced as income rises above those thresholds.
Loan requirement
- The loan must have originated after December 31, 2024.
- It must be secured by a first lien on the vehicle.
How to claim it
The deduction is reported on the new Schedule 1-A with your federal return. Keep your loan interest statements and confirm your vehicle’s final-assembly point (window sticker or VIN).
This page is general information, not tax advice. Rules can change — confirm with the IRS or a qualified tax professional.