What makes a car qualify
The 2026 car-loan interest deduction (IRC §163(h)(4)) is generous but specific. Before you count on it, the vehicle and loan must meet all of these:
- New — you're the first owner (used cars don't qualify).
- Final assembly in the United States — check the window sticker or VIN.
- Under 14,000 lbs gross vehicle weight (covers cars, most trucks and SUVs).
- Personal use over 50% — not primarily a business vehicle.
- Loan originated after Dec 31, 2024, secured by a first lien on the car.
A lease does not qualify — this is for purchase loans. Interest is highest in the early years of a loan, so the deduction is usually biggest in years 1–2.
A smart move before you sign
If you're choosing between models, U.S. final assembly can be worth real money here — two similar cars can differ by hundreds in after-tax cost just based on where they're built. Run your expected first-year interest above, then see how it combines with your other 2026 breaks in the Total Tax Change calculator.
Buyer FAQ
Can I deduct car loan interest on a new car?
Yes — up to $10,000/year for 2025–2028 on a qualifying new, U.S.-assembled vehicle financed after Dec 31, 2024.
Does a used car or lease qualify?
No. Only purchase loans on qualifying new vehicles.
How do I know where my car was assembled?
The window sticker (Monroney label) lists final assembly point; the VIN's first character also indicates country of manufacture.
Sources
- IRS — OBBBA deductions
- One Big Beautiful Bill Act §70203 (IRC §163(h)(4))
Disclaimer: Educational estimate based on IRC §163(h)(4) and IRS guidance as of June 2026. Not tax advice. FedCalc is independent and not affiliated with the U.S. government or IRS.