Car loan interest deduction,
up to $10,000/year.

Field guide

The 2026 car loan interest deduction, explained.

The One Big Beautiful Bill Act (OBBBA) created a new, temporary deduction for interest paid on a qualifying new-vehicle loan — up to $10,000 per year, for tax years 2025 through 2028. Final Treasury regulations (T.D. 10054) were published September 8, 2026 and take effect November 9, 2026, spelling out exactly which loans and vehicles qualify.

Above-the-line: a genuinely useful detail

Unlike most itemized-style deductions, this one is above-the-line — it reduces your AGI directly, so you get it whether you itemize or take the standard deduction. Most people assume a new deduction like this requires itemizing; it doesn't, and that alone makes it available to a much wider group of taxpayers than a typical itemized break.

What actually qualifies

• New vehicle — original use must commence with you. A used car, even one you're the first private buyer of after a dealer demo, generally doesn't qualify.
• Final assembly in the United States — verified by the vehicle's VIN through the NHTSA VIN decoder, not assumed from the brand name. A foreign-brand vehicle built in a US plant can qualify; a US-brand vehicle assembled abroad does not.
• First-lien loan — a genuine purchase-money auto loan secured by the vehicle. Leases, HELOCs, and other credit lines don't count.
• Loan originated after December 31, 2024 — an existing loan from before that date doesn't qualify, even if the vehicle itself would otherwise meet every other condition.

Not EV-specific — a real point of confusion

This deduction is completely unrelated to the federal EV tax credit, which was terminated for vehicles acquired after September 30, 2025. The car loan interest deduction applies to any qualifying new vehicle — gas, hybrid, diesel, or electric — financed with a qualifying loan. If you're cross-shopping an EV against a gas vehicle, this deduction doesn't change that comparison; it's available on either choice as long as the loan and vehicle both qualify.

The MAGI phase-out

Your deduction is reduced by $200 for every $1,000 (or part of $1,000) that your MAGI exceeds $100,000 (single or head of household) or $200,000 (married filing jointly). That step mechanic — the same "or fraction thereof" ceiling rounding used elsewhere in the tax code — fully wipes out a $10,000 deduction at $50,000 over the threshold, commonly cited as roughly $150,000 single / $250,000 joint. Because of the rounding, the actual cutoff can land a little before that round number, which is why this calculator computes your exact reduction rather than quoting a single "phased out above $X" figure.

Form 1098-VLI: where your number comes from

If you paid $600 or more in qualifying interest during the year, your lender is required to send you Form 1098-VLI (Vehicle Loan Interest Statement) — the same mechanic as Form 1098 for mortgage interest. That form is the concrete source for the "interest paid" figure this calculator asks for; if you haven't received one yet, use the loan-estimate mode instead to project your first year's interest from your loan amount, rate, and term.

Disclaimer

This calculator is for informational planning purposes only and does not constitute tax advice. Final eligibility depends on facts specific to your loan and vehicle — including plant-of- assembly documentation and the exact loan origination date — that this tool cannot verify for you. Confirm your specific situation with a tax professional or your lender before relying on this deduction in your tax planning.