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Car Loan Interest Deduction Calculator 2026

How much car loan interest you can deduct in 2025–2028: year-by-year interest on your loan, the $10,000 cap, the $100,000 / $200,000 phase-out at $200 per $1,000, the US-final-assembly test and the federal tax saved.

✅ Figures verified. The $10,000 cap, the $100,000 / $200,000 phase-out at $200 per $1,000, the US-final-assembly, new-vehicle and under-14,000-lb rules confirmed against IRC §163(h)(4) (P.L. 119-21) and the IRS OBBBA deductions page on 8 October 2026. Tax years 2025–2028, loans originated after 31 December 2024.
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In short

From 2025 to 2028 you can deduct up to $10,000 a year of interest on a loan for a new, personal-use vehicle under 14,000 lb that had its final assembly in the United States, without itemizing. The deduction falls $200 for every $1,000 of MAGI above $100,000 ($200,000 joint) and is gone at $150,000 / $250,000; used cars and leases do not qualify, and the VIN must be reported.

Who this is for: US buyers financing a new US-assembled vehicle in 2025–2028.

Not tax or legal advice. Federal income tax only; the assembly test depends on the specific vehicle and plant. Confirm eligibility with the dealer paperwork and the IRS instructions.
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The new car loan interest deduction (2025–2028)

  • Up to $10,000 a year of interest on a loan for a new, personal-use vehicle assembled in the US, deductible whether or not you itemise.
  • Phase-out: $200 for each $1,000 of MAGI above $100,000 ($200,000 joint) — gone entirely at $150,000 ($250,000 joint).
  • Typical value: interest on a $42,000, 72-month loan at 7.5% is about $2,950 in year one, falling each year as the balance drops. At a 22% marginal rate that is roughly $650 of tax saved in year one and about $1,650 over 2026–2028.
  • Assembly test: the vehicle's final assembly plant must be in the US. Check the VIN (a first character of 1, 4 or 5 usually means US-built) and the Monroney sticker's "final assembly point".
  • What does not count: leases, used vehicles, refinancing beyond the original balance, business vehicles (deduct those on Schedule C instead), RVs and vehicles over 14,000 lb.

See also: Car Payment Calculator — Auto Loan with Trade-In & Tax, Car Lease vs Buy Calculator.

Sources: IRC §163(h)(4); IRS — OBBBA deductions for working Americans and seniors. Checked 8 October 2026.

Assumptions

  • Standard amortisation at the APR; interest summed per 12-month loan year.
  • Deduction = min(interest, $10,000) less $200 per $1,000 (or part) of MAGI over $100,000 ($200,000 joint).
  • Three-year total assumes the same MAGI each year; the provision ends after 2028.

Worked example

Single, $42,000 loan at 7.5% over 72 months, MAGI $85,000, US-assembled new SUV

Payment $726 a month. Interest: year 1 about $2,955, year 2 $2,508, year 3 $2,026. MAGI is under $100,000, so the whole year-1 interest is deductible — about $650 of federal tax saved at 22%, cutting the effective APR to roughly 5.85%. Over 2026–2028 about $7,490 is deductible. At $120,000 of MAGI the deduction would shrink by $4,000 a year; at $150,000 it would be gone.

Frequently asked questions

Does my car qualify?

It must be new, under 14,000 lb, for personal use, financed by a loan secured on the vehicle after 31 December 2024, and have had its final assembly in the US. The window sticker shows the assembly point.

Do I need to itemise?

No — it is deducted on Schedule 1-A alongside the standard deduction. You must list the VIN on your return.

Does a used car or a lease count?

No. Only new vehicles whose original use starts with you, and only loans — lease payments are not interest.

What if I refinance?

Interest on a refinanced loan still qualifies, but only up to the balance of the original qualifying loan.

How do I check final assembly?

The Monroney window sticker lists the final assembly point; VINs beginning with 1, 4 or 5 are typically US-built, but confirm with the sticker or the dealer.

Does a motorcycle qualify?

Yes — motorcycles are included if new, under 14,000 lb, US-assembled and for personal use.

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Written by the Swift IT Sols editorial team · SWIFT SOLSRules sourced from the official authorities named on this page and last checked How we source and check calculators

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