Which cars qualify for the car loan interest deduction?

A new vehicle (original use begins with you) with final assembly in the United States, gross vehicle weight under 14,000 pounds, used more than 50% for personal use, financed by a loan originated after December 31, 2024 and secured by a first lien.

Car Loan Interest Deduction Calculator (2026)

Estimate your federal tax savings from the new car loan interest deduction. Enter your interest and income to see your deductible amount and real savings.

Last updated: June 2026 By the FedCalc Editorial Team · checked against IRC §163(h)(4) & IRS guidance

The short answer: The One Big Beautiful Bill Act (IRC §163(h)(4)) lets you deduct up to $10,000 of interest per year on a qualifying new-vehicle loan for 2025–2028. The car must have final assembly in the U.S., and the deduction phases out above $100,000 (single) / $200,000 (joint) of income. Savings = deductible interest × your tax rate. Confirmed

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This calculator needs JavaScript. Quick reference: deduct up to $10,000 of qualifying car-loan interest for 2025–2028 (U.S.-assembled new vehicle); savings ≈ interest × your tax rate. Full rules below.

How the car loan interest deduction works

Created by the One Big Beautiful Bill Act as Internal Revenue Code §163(h)(4), this deduction lets you write off interest on a qualifying auto loan for tax years 2025–2028. It is claimed on the new Schedule 1-A (Part IV) and requires the vehicle's VIN; lenders are expected to issue a Form 1098-VLI from 2026.

The key numbers

Rule	Amount	Status
Maximum deduction (per return)	$10,000	Confirmed
Phase-out begins (MAGI)	$100,000 single / $200,000 joint	Confirmed
Phase-out rate	−$200 per $1,000 over threshold	Confirmed
Fully phased out	$150,000 single / $250,000 joint	Confirmed
Applies to tax years	2025–2028 (then expires)	Confirmed

Which vehicles qualify

New vehicle — original use begins with you (used cars don't qualify).
Final assembly in the United States (check the vehicle's window sticker / VIN).
Gross vehicle weight rating under 14,000 lbs.
Used more than 50% for personal use.
Loan originated after Dec 31, 2024 and secured by a first lien on the vehicle.

Want to know if your model qualifies? See our guide: which cars qualify for the 2026 deduction.

Worked example

You file single, earn $60,000, and pay $2,500 in car-loan interest this year. You're below the $100,000 phase-out, so the full $2,500 is deductible. In the 12% bracket that saves about $300. The calculator computes your exact figure, including the phase-out at higher incomes.

Frequently asked questions

How much car loan interest can I deduct in 2026?

Up to $10,000 per return on a qualifying new-vehicle loan, for 2025–2028. Savings = deductible interest × your marginal tax rate.

Which cars qualify?

A new vehicle with U.S. final assembly, GVWR under 14,000 lbs, more than 50% personal use, financed by a first-lien loan originated after Dec 31, 2024.

Is there an income limit?

Yes — reduced by $200 per $1,000 of MAGI above $100,000 (single) / $200,000 (joint), gone by $150,000 / $250,000.

Does a lease qualify?

No. The deduction applies to interest on a loan to purchase a qualifying vehicle, not lease payments.

Methodology & sources

Savings = your eligible interest deduction (after phase-out) × your 2026 marginal federal rate, from the official 2026 tax tables. Rules follow IRC §163(h)(4).

IRS — OBBBA deductions overview
One Big Beautiful Bill Act §70203 (IRC §163(h)(4))

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FedCalc Editorial Team
We build free calculators for new U.S. federal programs and check every formula against the underlying law and IRS guidance. Estimates only — not tax advice.

Disclaimer: Educational estimate based on IRC §163(h)(4) and IRS guidance as of June 2026; some details are still being finalized. Not tax advice. FedCalc is independent and not affiliated with the U.S. government or IRS.