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Car Loan Interest Deduction Calculator

Qualification comes first: a new, personally used vehicle with US final assembly, bought with a loan originated after December 31, 2024 and secured by a first lien. Leases never qualify. Then the interest is capped at $10,000 and phased out faster than any other new deduction. US federal, tax years 2025 to 2028.

Qualification first. Every answer must be yes before the interest counts:

  • The loan was originated after December 31, 2024.
  • It is a loan, not a lease.
  • The loan is secured by a first lien on the vehicle.
  • The vehicle is for personal use and is new.
  • Final assembly was in the United States (check the VIN below).

Your car loan interest estimate

Estimated deduction-

How the car loan deduction is calculated

Following Schedule 1-A, Part IV: start with the interest you paid, subtract any of it already deducted on Schedule C, E or F, and cap the result at $10,000. Then reduce it by $200 for every $1,000 OR PART of $1,000 of MAGI over $100,000 ($200,000 if married filing jointly). That round-up rule is why this deduction disappears completely at $150,000 of MAGI ($250,000 joint). The vehicle's VIN goes on the return. The deduction lowers taxable income, not AGI. Source: IRS Schedule 1-A (Form 1040, PDF), Part IV.

Worked examples

The register check

Interest $7,000, single, MAGI $124,200.

Excess $24,200 rounds up to 25 units, reduction $5,000, deduction $2,000

Just over the line

Interest $10,000, single, MAGI $100,001.

One part-unit counts: reduction $200, deduction $9,800

Business offset

Interest $9,000, of which $4,000 deducted on Schedule C, MAGI $90,000.

Only the remaining $5,000 can be claimed, deduction $5,000

Frequently asked questions

My car is an American brand. Does it qualify?
Brand does not decide it. Final assembly in the United States does, and several models from US brands are assembled abroad while some foreign brands assemble in the US. Check the VIN: a first character of 1, 4 or 5 points to US assembly, and the manufacturer label or the NHTSA VIN decoder confirms it.
Can I claim it if I file married filing separately?
Yes. Unlike the tips and overtime deductions, this one does not require joint filing. A separate filer uses the $100,000 threshold.
Does a used car or a lease qualify?
No. The vehicle must be new and purchased with a qualifying loan. Lease payments never qualify.

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Disclaimer: Estimate only. US federal deductions, tax years 2025 to 2028. This calculator is not tax advice.

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