How to use the car loan interest deduction calculator
- 1 Enter the amount borrowed, the APR and the term in months.
- 2 Enter your modified adjusted gross income.
- 3 Choose your filing status.
- 4 Confirm the car is new, for personal use and assembled in the US, then read the saving.
Worked example
A $40,000 loan at 7.5% over 60 months, single filer with $85,000 of income. The payment is $801.52 a month and interest in the first 12 months is $2,767.69. Income is under $100,000, so all of it is deductible, saving $608.89 at the 22% bracket. At $120,000 of income the phase-out ($4,000) wipes out the deduction.
Qualifying for the car loan deduction
- Check final assembly on the window sticker or VIN before you buy.
- Finance, do not lease: lease payments do not qualify.
- Keep the lender's interest statement and the VIN for your return.
- Mind the phase-out from $100,000 ($200,000 joint).
Work out the payment with the Car Loan Calculator, check what you can afford with the Car Affordability Calculator, and compare leasing with the Car Lease Calculator.
Features
First-year interest
Builds the amortization to find interest in the first 12 months.
Phase-out
$200 off for each $1,000 or part over $100,000 or $200,000.
Qualification check
New vehicle, personal use, US final assembly, secured loan.
When to use it
Buying a new car
See the real after-tax cost of financing. Work out the payment with the Car Loan Calculator.
Comparing models
A car assembled abroad does not qualify, even from a US brand. Check affordability with the Car Affordability Calculator.
Lease or buy
Leases do not qualify. Compare with the Car Lease Calculator.
Tax planning
Add the deduction to your refund estimate in the Tax Refund Calculator.
Related Tax tasks
Frequently asked questions
Is car loan interest tax deductible in 2026?
Yes, for loans on new vehicles bought for personal use and assembled in the United States, for tax years 2025 through 2028. You can deduct up to $10,000 of interest a year.
Which vehicles qualify?
New cars, minivans, vans, SUVs, pickup trucks and motorcycles under 14,000 pounds gross vehicle weight, with final assembly in the United States. Used cars and leases do not qualify.
How do I know where my car was assembled?
Check the final assembly location on the vehicle information label (window sticker) or decode the VIN with NHTSA's VIN decoder. The brand does not matter, only the plant.
How does the income phase-out work?
The $10,000 limit is reduced by $200 for each $1,000 (or part) of modified AGI above $100,000, or $200,000 for joint filers. It disappears at $150,000 single or $250,000 joint.
Do I need to itemize?
No. It is claimed on Schedule 1-A, so you can take it with the standard deduction.
Which loans qualify?
Loans taken out after December 31, 2024 to buy the vehicle, secured by the vehicle. Loans from family members and refinancing above the original amount do not qualify.
What do I need to claim it?
The vehicle's VIN on your return, plus the interest statement from your lender. Lenders report qualifying interest to the IRS.
Is it $10,000 per car?
No. The limit is $10,000 per return, however many qualifying loans you have.
How much will I actually save?
The saving is the deduction times your tax bracket. On a typical $40,000 loan, first-year interest is under $3,000, so the saving is a few hundred dollars.
Results are estimates based on the official rates linked above. Confirm important figures with the issuing authority or a qualified adviser before you act on them.
Built and reviewed by Hamza Farooq, founder and lead developer
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