Car loan interest deduction (2026): which vehicles and loans qualify
For 2025 through 2028, interest on a loan for a new, American-assembled vehicle is deductible: up to $10,000 a year, whether or not you itemize. The vehicle and loan have to meet every condition below.
General information, not tax advice. Based on the IRS instructions for Schedule 1-A and 2026 IRS guidance. Your situation may differ; check the official sources below or ask a tax professional.
The deduction at a glance
| Maximum deduction | $10,000 of interest a year |
| Phase-out starts (MAGI) | $100,000; $200,000 joint |
| Fully phased out | $150,000; $250,000 joint |
| Loans taken out | After December 31, 2024 |
| Years | 2025 to 2028 |
The deduction falls by $200 for each $1,000 (or part of $1,000) of modified AGI over the threshold. For most people, modified AGI is the AGI on Form 1040. With $104,500 of income, a single filer with $2,800 of interest loses $1,000 and deducts $1,800.
The vehicle must be
- New: the original use starts with you. Used vehicles do not qualify.
- A car, minivan, van, SUV, pickup truck or motorcycle made mainly for public roads, with a gross vehicle weight rating under 14,000 pounds.
- Assembled in the United States (final assembly). Check the window sticker or the plant of manufacture in the NHTSA VIN decoder.
The loan must be
- Taken out by you after December 31, 2024, to buy the vehicle. Leases do not count.
- Secured by a first lien on that vehicle.
- For a vehicle bought for personal use, meaning you expect more than half its use to be personal (by you or family).
The financed amount can include the price plus items normally financed with it, such as sales tax, fees, service plans and extended warranties. Interest tied to things like insurance, a trailer or negative equity rolled in from a trade-in does not count.
Claiming it
You enter the vehicle's VIN on Schedule 1-A with the interest you paid. For 2026, lenders report the interest on the new Form 1098-VLI, Vehicle Loan Interest Statement; for 2025, use the interest amount your lender shows for the year. If you inherit a qualifying car with its loan, the interest generally still counts.
Example
A single buyer with $85,000 of income financed a new U.S.-assembled SUV in 2026 and paid $2,800 of interest that year. All of it is deductible, which saves about $616 of federal income tax at a 22% rate.
Shopping for the loan? Compare auto loan rates and run payments in the auto loan calculator on our sister site Your Best Loan Rates.
Estimate it: the Schedule 1-A calculator applies the limits and phase-outs for all four new deductions and shows the tax saved. For your whole return, try the tax refund calculator.
Frequently asked questions
Does a used car qualify?
No. The original use of the vehicle must start with you, so the deduction is for new vehicles only.
Does a lease qualify?
No. Lease payments do not count; it must be a loan used to buy the vehicle.
How do I know where my car was assembled?
Check the vehicle information label on the window sticker at the dealer, or enter the VIN in the NHTSA VIN decoder and look at the plant of manufacture. Final assembly must be in the United States.
Can I refinance and keep the deduction?
Generally yes, if the new loan is secured by a first lien on the same vehicle. Interest counts only on up to the balance of the old loan at the time of refinancing.
I use the car for rideshare. Does it still count?
It can. The vehicle must be bought for personal use, meaning you expect more than half of its use to be personal. Interest you deduct as a business expense on Schedule C cannot also be deducted here.
Do I need to itemize?
No. You claim it on Schedule 1-A with either the standard deduction or itemized deductions.
Can married people filing separately claim it?
Yes. Unlike the tips, overtime and senior deductions, the IRS instructions do not require a joint return for this one. The income limit for married filing separately is the single amount.
Official sources
- IRS Instructions for Form 1040 (2025), Instructions for Schedule 1-A
- IRS Schedule 1-A (Form 1040), Additional Deductions
- IRS Form 1098-VLI, Vehicle Loan Interest Statement
- NHTSA VIN decoder (plant of manufacture)
The other new deductions
- No tax on tips — Who qualifies, which tips count, the tipped-occupations list and how tips show on your W-2.
- No tax on overtime — Only the extra half of time-and-a-half counts; who is covered and how to find the amount.
- Senior deduction — An extra deduction for each person 65 or older, on top of the standard deduction.
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