How the car loan interest deduction works
If you took out a loan to buy a new, US-assembled, personal-use vehicle after 2024, the interest you paid on that loan may be deductible — up to $10,000 a year. The deduction shrinks if your household income is high enough to trigger the phase-out.
The formula
threshold = $100,000 (single) or $200,000 (joint) phaseOutSteps = ceil(max(0, MAGI − threshold) / $1,000) phaseOutReduction = phaseOutSteps × $200 deductibleAmount = max(0, min(interestPaid, $10,000) − phaseOutReduction)
Note the phase-out here rounds up (ceiling) to the next $1,000 — the opposite of the tips and overtime deductions, which round down.
Worked example
A single filer paid $8,000 in qualified interest and has a MAGI of $130,000.
- Base: $8,000 (under the $10,000 cap).
- Excess MAGI: $130,000 − $100,000 = $30,000, which is exactly 30 full $1,000 steps.
- Phase-out reduction: 30 × $200 = $6,000.
- Deductible amount: $8,000 − $6,000 = $2,000.
Frequently asked questions (FAQ)
Does a used car qualify?
No. The vehicle must be new — not used, and not leased. It must also be for personal use, purchased after December 31, 2024, and finally assembled in the United States.
Do leases qualify?
No. Only loans secured by the vehicle qualify. Lease payments, regardless of the vehicle's origin or purchase date, are not qualified passenger vehicle loan interest.
How do I know if my vehicle was assembled in the US?
Check the VIN plate on your vehicle, or look up your VIN with NHTSA's VIN decoder. Your lender should also report qualified interest to you on Form 1098-VLI.
Do refinanced loans qualify?
The sources reviewed for this calculator don't clearly resolve how refinanced loans are treated. Verify against the full Schedule 1-A instructions or a tax professional before relying on this for a refinanced loan.
Does it apply if I take the standard deduction?
Yes. Like the other OBBBA deductions, this one is available whether you itemize or take the standard deduction.