Car Loan Interest Deduction Calculator

How the deduction works

The deduction is claimed on the new Schedule 1-A and lowers your taxable income, whether you take the standard deduction or itemize. It is capped at $10,000 of interest per return, whatever your filing status, so a married couple with two qualifying cars can still deduct $10,000 at most.

Above $100,000 of modified adjusted gross income ($200,000 for joint returns), the deduction shrinks by $200 for every $1,000 over the line, and a partial $1,000 counts as a full one. Married couples filing separately can claim it, with the $100,000 threshold.

Example from the IRS regulations: a single filer pays $7,000 of qualifying interest and has $124,200 of income. That is $24,200 over the line, which rounds up to 25 steps of $1,000. The deduction drops by $5,000, to $2,000.

Which vehicles and loans qualify

The vehicle must be new (its original use starts with you), a car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds, and have its final assembly in the United States. The final assembly location is on the label on new vehicles at the dealer, and you can also check the plant of manufacture in the VIN with the NHTSA VIN decoder.

The loan must be taken out by you after December 31, 2024, to buy the vehicle, be secured by a first lien on it, and the vehicle must be for personal use more than half the time. Leases, used cars, credit card purchases and loans from a related person (such as a parent, child, sibling or spouse) don't qualify.

Interest on financed sales tax, title and registration fees, and extended warranties counts. Interest on negative equity from a trade-in, a trailer, or regular car insurance does not. If you refinance, interest still counts on up to the balance of the old loan.

Finding your interest amount

Starting with 2026, lenders that receive $600 or more of interest send Form 1098-VLI, with the interest in box 1. For 2025, lenders could instead show the total on an online account, a monthly statement or a year-end statement.

If you don't have the figure yet, the estimate option works out a standard monthly loan schedule from the amount financed, rate and term. Use your lender's number when you file.

Questions