Car Loan Interest Deduction Calculator: Estimate Your Federal Deduction
Yes, you can deduct car loan interest for tax years 2025 through 2028, but only on a loan for a new vehicle with final assembly in the United States, bought for personal use. You can deduct up to $10,000 of interest a year per return, and the amount shrinks for modified AGI above $100,000 ($200,000 joint). You do not have to itemize. It is a deduction, not a credit, and you must report the vehicle identification number (VIN) on your return. Use the calculator below to estimate your deduction.
Maintained by Archie Chang · Rules checked against the statute, the IRS final regulations and IRS forms on October 28, 2026 · Methodology & sources
Your loan and income
Your estimated car loan interest deduction
- Eligible interest
- $2,400.00
- Cap per return
- $10,000.00
- Interest after the cap
- $2,400.00
- Income phase-out reduction (0 steps of $1,000 or part of $1,000 over $100,000)
- −$0.00
- Estimated federal deduction
- $2,400.00
- Estimated federal income tax saved at 22%
- $528.00
Estimate only: deduction times your chosen marginal rate. It ignores bracket edges, credits and anything else on your return.
You can take this deduction whether you itemize or take the standard deduction. It is a deduction, not a credit. This calculator does not estimate state income tax; whether your state allows a similar deduction depends on your state’s law.
You must put the vehicle identification number (VIN) on your return, and the cap is per return. Check your lender’s interest statement against these estimates.
Who qualifies for the car loan interest deduction
Section 163(h)(4) of the Internal Revenue Code, added by section 70203 of Public Law 119-21 (the 2025 reconciliation act, which the IRS calls the One, Big, Beautiful Bill Act or OBBBA in its regulations; the IRS fact sheet is titled “Working Families Tax Cuts”), lets you deduct interest on a loan for a qualified passenger vehicle. The IRS summarizes the window:
“Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria.”
The regulations apply the same window in plain terms, and say who may take the deduction:
“This section applies to taxable years beginning after December 31, 2024, and before January 1, 2029.”
“Only a taxpayer that is an individual, decedent’s estate, or non-grantor trust may deduct QPVLI in computing the taxpayer’s taxable income.”
Filing status. The statute does not require a joint return, and T.D. 10054 sets the limit by return, not by person:
“The amount taken into account as QPVLI by a taxpayer for any taxable year may not exceed $10,000 per Federal tax return regardless of filing status.”
“A and B can deduct no more than $10,000 as QPVLI on their joint Federal income tax return because of the dollar limitation described in paragraph (h)(1) of this section.”
The IRS answers the filing-status question directly in the preamble to the regulations:
“The Treasury Department and the IRS confirm that filing status does not impact QPVLI deduction eligibility.”
Married filing separately is therefore not excluded, unlike the overtime and tips deductions. The Schedule 1-A phase-out line reads:
“Enter $100,000 ($200,000 if married filing jointly)”
So married filing separately, single, head of household and qualifying surviving spouse all start the phase-out at $100,000. The sources read for this page do not say how spouses who file separately divide the interest on one loan, but they do say what the lender must warn you about:
“A legend stating that the payor of record may be unable to deduct the full amount of SPVL interest reported on the statement; that limitations based on the payor of record’s modified adjusted gross income may apply; and that the payor of record may deduct QPVLI only to the extent the SPVL was incurred by, and the QPVLI was actually paid by, the payor of record.”
The deduction is for interest you actually pay or accrue on your own loan. The IRS instructions list the loan being originated by you as a requirement, with an exception when you became the obligor because the previous borrower died.
Related pages: if you are weighing the standard deduction against itemizing, see the SALT deduction calculator; this deduction is available either way. Workers can also check the no tax on overtime calculator and the no tax on tips calculator, the other deductions added by the same law and claimed on the same Schedule 1-A.
The vehicle and loan rules
The vehicle
Section 163(h)(4)(D) calls it an “applicable passenger vehicle” (APV). The regulations list every condition, and a vehicle that misses one, such as a truck rated at 14,000 pounds or more or an off-road-only vehicle, does not qualify:
“A vehicle is an APV only if— (i) The original use of the vehicle commences with the taxpayer (as described in paragraph (e)(2) of this section); (ii) The vehicle is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails); (iii) The vehicle has at least 2 wheels; (iv) The vehicle is a qualified vehicle type; (v) The vehicle is treated as a motor vehicle for purposes of title II of the Clean Air Act; (vi) The vehicle has a gross vehicle weight rating of less than 14,000 pounds; and (vii) The final assembly of the vehicle occurs within the United States (as described in paragraph (e)(3) of this section).”
The statute adds:
“Such term shall not include any vehicle the final assembly of which did not occur within the United States.”
New means original use starts with you. The regulations tie that to your loan paperwork:
“In the case of a purchaser that incurs indebtedness for the vehicle purchase, original use of the vehicle does not commence with that purchaser unless the loan documentation treats the vehicle as a new vehicle.”
A dealer’s demonstrator vehicle can still be new for you, and a vehicle you return to the seller within 30 days of delivery is treated as never having been yours, and original use can then start with a later buyer (T.D. 10054, 1.163-16(e)(2)):
“Original use of the vehicle does not commence with A. A is not considered to be the first person that takes delivery of the vehicle after it is sold, registered, or titled as A returned the vehicle to Dealer within 30 days of taking delivery of the vehicle. Original use of the vehicle may commence with a subsequent purchaser of the vehicle.”
A vehicle you buy at the end of your own lease generally isn’t new for you. The IRS says:
“Additionally, if a lessee purchases a vehicle during or at the end of a vehicle lease term and finances that purchase by incurring a loan, the loan documentation generally does not treat the vehicle as a new vehicle.”
The loan
The interest must be paid or accrued on debt you took on after December 31, 2024 to buy the vehicle and secured by a first lien on it. The regulations define a first lien this way:
“The term secured by a first lien means a valid and enforceable security interest under State or other applicable law in an APV that is the first voluntary security interest recorded against the vehicle, regardless of subsequent involuntary liens such as tax liens or other similar security interests that may be given temporary higher priority at a later date following the date of purchase.”
The next sentence matters if the title paperwork is slow:
“An APV may be considered to be secured by a first lien as long as there is a lending agreement evidencing a security interest under State or other applicable law, even if that lien has not yet been perfected or recorded due to processing times or other similar delays arising under State or other applicable law.”
If you refinanced, the original loan must itself be a qualifying loan, taken out by you after 2024 to buy the vehicle:
“Indebtedness is an SPVL only if the indebtedness is incurred by the taxpayer after December 31, 2024, for the purchase of an APV for personal use, and is secured by a first lien on that APV.”
The vehicle must also be for personal use. The IRS test is about what you expect when you take out the loan:
“A taxpayer that incurs indebtedness to purchase an APV is considered to purchase that APV for personal use if, at the time the indebtedness is incurred, that taxpayer expects that the APV will be used for personal use by the taxpayer, the taxpayer’s spouse, or an individual that is related to the taxpayer within the meaning of section 152(c)(2) or (d)(2) of the Code, or any combination of these individuals, for more than 50 percent of the time.”
What does not count:
“QPVLI does not include any amount paid or accrued on any of the following: (i) A loan to finance fleet sales. (ii) A loan incurred for the purchase of a commercial vehicle that is not used for personal purposes. (iii) Any lease financing. (iv) A loan to finance the purchase of a vehicle with a salvage title. (v) A loan to finance the purchase of a vehicle intended to be used for scrap or parts.”
“The term lease financing means a transaction that is not a purchase of an APV, and under which a taxpayer has usage rights with respect to an APV but is not considered the owner of the APV under State or other applicable law.”
“Indebtedness described in subparagraph (B) shall not include any indebtedness owed to a person who is related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer.”
Here QPVLI stands for qualified passenger vehicle loan interest and SPVL for specified passenger vehicle loan, the IRS’s names for the qualifying interest and the qualifying loan.
What part of the loan counts
“Indebtedness that can be counted for purposes of determining QPVLI includes indebtedness incurred to finance the purchase price of the APV, as well as items or amounts that are customarily financed in an APV purchase transaction and that are directly related to the purchased APV.”
“Interest on items and services not customarily financed in an APV purchase transaction and that are directly related to the purchased APV, such as liability insurance, a trailer, or amounts representing debt on a vehicle traded in as part of the purchase transaction for the APV (so-called negative equity), is not eligible for the deduction.”
That matters for the interest number you type in. A lender statement, especially the 2025 statement under Notice 2025-57, may include interest on parts of the loan that do not qualify. The regulations allocate interest in proportion:
“As a result, only 90 percent of each interest payment on the loan may be QPVLI.”
Refinancing keeps the deduction alive, with a limit:
“If a taxpayer refinances an SPVL (refinanced loan), the resulting indebtedness (new loan) is an SPVL if the new loan is secured by a first lien on the APV with respect to which the refinanced loan was incurred. The amount of the new loan that is an SPVL is limited to the outstanding balance of the refinanced loan as of the date of the refinancing.”
To compare a new payment, total interest and break-even month before you refinance, use the car refinance calculator.
If part of the loan interest could also be deducted elsewhere, for example because you use the vehicle for a business you own, you choose where, but only once:
“If some or all of the QPVLI qualifies to be deducted in more than one place on your return, you may choose where to report the deduction, but you cannot deduct the same amount more than once.”
Enter only the interest you will claim on Schedule 1-A in the calculator’s interest box, after removing amounts deducted on Schedule C, E or F.
The VIN requirement
The statute makes the VIN a condition of the deduction:
“Interest shall not be treated as qualified passenger vehicle loan interest under this paragraph unless the taxpayer includes the vehicle identification number of the applicable passenger vehicle described in clause (i) on the return of tax for the taxable year.”
For more than one vehicle, the IRS instructions say:
“If you paid QPVLI allocable to multiple APVs, include the VIN of each APV.”
If you do not know your interest: how the estimate works
The calculator’s second mode uses a standard amortization with level monthly payments. A $12,000 loan at 12% APR over 12 months has a payment of $1,066.19; the first month’s interest is $12,000 × 1% = $120.00, and the second month’s is about $110.54 on the remaining balance. The estimate adds up the interest in the payments made during your tax year, so a loan whose first payment is in November has only two payments in its first year. The calculator assumes a month-by-month schedule with no extra days before the first payment, no points and no fees, so it will differ from the lender’s number. Use the lender’s statement when you have it.
How to check final assembly
The regulations define final assembly as the point where the vehicle is complete enough to deliver to a dealer:
“The term final assembly means the process by which a manufacturer produces a vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle.”
The IRS gives two ways to find out where that happened. The first is the label on the vehicle:
“The location of final assembly will be listed on the vehicle information label attached to each vehicle on a dealer’s premises.”
The second is the VIN:
“You can also rely on the vehicle’s plant of manufacture as reported in the VIN to determine whether the vehicle has undergone final assembly in the United States.”
The IRS instructions point to the National Highway Traffic Safety Administration (NHTSA) VIN decoder for plant of manufacture information; it is at nhtsa.gov/vin-decoder. The regulation says it this way:
“To determine whether the final assembly of a vehicle occurred within the United States, a taxpayer may rely on— (i) The vehicle’s plant of manufacture as reported in the VIN; or (ii) The final assembly point reported on the label affixed to the vehicle as described in 49 CFR 583.5(a)(3).”
The draft instructions for the lender form say the same thing about the VIN (a draft; check the final instructions):
“To determine whether final assembly of the vehicle occurred within the United States, you may rely on the vehicle’s plant of manufacture as reported in the VIN.”
This page does not teach you to read a VIN yourself. Use the vehicle information label or the NHTSA tool, and keep a copy of the result with your tax records.
The income phase-out, with a worked example
The statute sets the cap and then the reduction:
“The amount of interest taken into account by a taxpayer under subparagraph (B) for any taxable year shall not exceed $10,000.”
“The amount which is otherwise allowable as a deduction under subsection (a) as qualified passenger vehicle loan interest (determined without regard to this clause and after the application of clause (i)) shall be reduced (but not below zero) by $200 for each $1,000 (or portion thereof) by which the modified adjusted gross income of the taxpayer for the taxable year exceeds $100,000 ($200,000 in the case of a joint return).”
The IRS fact sheet puts the same limits in one sentence pair:
“Maximum annual deduction is $10,000. Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).”
Modified AGI is your adjusted gross income plus any income excluded under section 911, 931 or 933; for most people it is Form 1040 adjusted gross income, which Schedule 1-A Part I carries onto its line 3. The cap is applied first, then the reduction.
This one rounds up. “Or portion thereof” means any part of a $1,000 step counts as a whole step. The IRS form says so on its line for the number of thousands:
“Divide line 27 by $1,000. If the resulting number isn’t a whole number, increase the result to the next higher whole number. (For example, increase 1.5 to 2, and increase 0.05 to 1.)”
The 2026 early release draft of Schedule 1-A (marked “DRAFT — DO NOT FILE”) has the same rule on its line 34, so the rounding is expected to hold for 2026. Check the final 2026 form when the IRS publishes it:
“Divide line 33 by $1,000. If the resulting number isn’t a whole number, increase the result to the next higher whole number. (For example, increase 1.5 to 2, and increase 0.05 to 1.)”
The regulations give a worked example:
“Thus, the $7,000 amount must be reduced by $5,000, which is equal to $200 x 25 ($24,200 / $1,000 = 24.2 (which is then rounded up to 25)).”
Worked examples (single filer unless noted)
- The IRS example. $7,000 of interest and modified AGI of $124,200: that is $24,200 over $100,000, which is 24.2 thousands rounded up to 25, so the reduction is 25 × $200 = $5,000and the deduction is $2,000.
- Cap and phase-out together. $12,000 of interest is cut to the $10,000 cap. Modified AGI of $104,500 is $4,500 over, which is 5 steps, so the reduction is 5 × $200 = $1,000 and the deduction is $9,000. At a 22% marginal rate that saves about $1,980.
- The rounding edge, $10,000 of interest. At modified AGI of $100,000 the deduction is $10,000. At $100,999 ($999 over) it is $9,800, because the first partial thousand costs a full $200. At $101,000 it is still $9,800, and at $101,001 it drops to $9,600.
- Full phase-out. The $10,000 cap loses $200 a step, so it takes 50 steps to reach $0: modified AGI of $149,000 still leaves $200, and anything above $149,000 leaves nothing. On a joint return the same numbers are $249,000.
- Joint return. A couple pays $11,000 of interest across two loans, modified AGI $230,000. One $10,000 cap applies to the return, the excess is $30,000 over $200,000 (30 steps), the reduction is $6,000 and the deduction is $4,000, about $960 of tax at 24%.
These results estimate the deduction and the federal income tax it saves, not your refund. The calculator does not know your other credits, bracket edges or your lender’s reported interest.
How to claim it: 2025 and 2026 returns
You claim the deduction on Schedule 1-A (Form 1040), Part IV, No Tax on Car Loan Interest, and the total of Schedule 1-A goes on line 13b of the 2025 Form 1040 (line 13a on the 2026 draft form). You do not have to itemize:
“You can claim this deduction whether you claim the standard deduction or itemize deductions on Schedule A (Form 1040).”
“Under section 63(b)(7) of the Code, the deduction for QPVLI allowable under section 163(h)(4) may be taken by a taxpayer without regard to whether the taxpayer itemizes deductions or takes the standard deduction.”
Schedule 1-A starts from your adjusted gross income, and the regulations say where the deduction comes off:
“As amended by the OBBBA, new section 63(b)(7) provides that so much of the deduction allowed by section 163(a) as is attributable to the exception under section 163(h)(4)(A) is subtracted from adjusted gross income in computing taxable income.”
The deduction therefore does not lower your adjusted gross income, and it does not lower the modified AGI used for the phase-out.
This calculator does not estimate state income tax. Whether your state allows a similar deduction depends on your state’s law, and the federal sources cited on this page cover federal income tax only, so check your state revenue agency.
2025 returns (filed in 2026)
On the 2025 Schedule 1-A, Part IV, lines 22 to 30: enter each vehicle’s VIN on line 22, column (i), then the interest for each loan in column (iii), with anything you deducted on Schedule C, E or F in column (ii). There are two VIN rows, and the instructions say to attach a statement if you need more. Line 24 is the smaller of the total or $10,000. Line 25 is your modified AGI from line 3, line 26 is $100,000 ($200,000 if married filing jointly), lines 27 to 29 work out the reduction, and line 30 is your deduction. Part VI, line 38, adds the parts of Schedule 1-A and carries the total to the Form 1040.
The 2025 Form 1040 instructions still refer to the proposed regulations. The IRS has since published final regulations, T.D. 10054 in Internal Revenue Bulletin 2026-39:
“The final regulations are effective on November 9, 2026.”
2026 returns (draft forms only)
The only 2026 form available when this page was checked is an early release draft, marked “DRAFT — DO NOT FILE”, so it can still change. On the 2026 draft Schedule 1-A, Part IV, lines 28 to 36, the same steps are on different lines: the VIN rows are line 28, the smaller-of-$10,000 line is 30, MAGI is line 31, the $100,000 ($200,000 joint) line is 32, the rounding-up step is line 34, and the deduction is line 36. The draft also asks, for each VIN, whether original use started with you and whether final assembly occurred within the United States, and adds a note that points to the lender form:
“Certain vehicle loan interest paid in 2026 should be reported to you on Form 1098-VLI, box 1.”
Its Part VI total, line 44, goes on line 13a of the draft 2026 Form 1040. Check the final 2026 form and instructions when the IRS publishes them; line numbers in this section are the draft’s.
2027 and 2028
No 2027 or 2028 forms had been found when this page was checked. The deduction applies only to taxable years beginning after December 31, 2024 and before January 1, 2029, so nothing here applies to 2029 and later without new legislation.
Reporting from lenders and Form 1098-VLI
Section 6050AA, added by the same law, makes lenders report the interest. The final regulations (T.D. 10054) say who must file:
“The information reporting requirements of section 6050AA of the Internal Revenue Code (Code) and this section apply to an interest recipient who receives at least $600 of interest on a specified passenger vehicle loan (SPVL) from a payor of record for a calendar year for which interest is received.”
“Whether an interest recipient receives $600 or more of interest on an SPVL for a calendar year is determined on an SPVL-by-SPVL basis.”
2025: transition relief
For interest received in 2025, IRS Notice 2025-57 let lenders skip the full return and instead give you a statement:
“As described in this transitional guidance, the recipient may satisfy the reporting obligations under section 6050AA for interest received in calendar year 2025 on a specified passenger vehicle loan by making a statement available to the individual on or before January 31, 2026, indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan.”
“In addition, the IRS will not impose penalties under sections 6721 and 6722 on recipients of interest that have satisfied the reporting obligations under section 6050AA for calendar 2025 as described in this notice.”
The notice says the statement can be an online account portal, a monthly statement, an annual statement or something similar. So for 2025 you may have no IRS form from your lender, only a statement of the total interest you paid.
2026 and later: Form 1098-VLI
The IRS decided not to extend the relief:
“Therefore, the Treasury Department and the IRS are not including additional transitional guidance or phased implementation in the final regulations.”
Lenders now file a return with the IRS and furnish you a statement. The deadlines in the regulations:
“An interest recipient must furnish a statement required by paragraph (h)(1) of this section to the payor of record on or before January 31 of the year following the calendar year for which it receives the interest.”
“An interest recipient must file a return required by paragraph (a) of this section on or before February 28 (March 31 if filed electronically) of the year following the calendar year for which it receives the interest.”
The final regulations name the form and what it tells you:
“Information reported on the Form 1098-VLI, Vehicle Loan Interest Statement, such as the vehicle’s VIN, whether the original use of the vehicle began with the purchaser (payor of record), and whether final assembly occurred in the United States, will enable taxpayers to accurately claim the QPVLI deduction.”
The Form 1098-VLI, Vehicle Loan Interest Statement (December 2026 revision) and its instructions were available only as early release drafts when this page was checked. The draft 2026 Schedule 1-A says box 1 holds the interest. Your statement must also carry a warning that the amount may not be fully deductible:
“A legend stating that the payor of record may be unable to deduct the full amount of SPVL interest reported on the statement; that limitations based on the payor of record’s modified adjusted gross income may apply; and that the payor of record may deduct QPVLI only to the extent the SPVL was incurred by, and the QPVLI was actually paid by, the payor of record.”
That is why the calculator asks for your modified AGI and the checklist: the lender’s total is the interest paid, not the deduction.
Car loan interest deduction questions
Is car loan interest tax deductible now?
Yes, for some loans. For tax years 2025 through 2028, you can deduct interest on a loan you took out after December 31, 2024 to buy a new car, minivan, van, SUV, pickup truck or motorcycle that had its final assembly in the United States, is under 14,000 pounds gross vehicle weight rating and is for personal use. The deduction is capped at $10,000 a year per return and phases out for modified AGI above $100,000 ($200,000 on a joint return). It is a deduction, not a credit.
How much can I deduct, and how does the income phase-out work?
At most $10,000 of interest per return, whatever your filing status. The deduction then drops by $200 for each $1,000, or portion of $1,000, that your modified AGI is above $100,000 ($200,000 on a joint return). The IRS form rounds the number of thousands up, so $999 over the threshold already costs $200, unlike the overtime and tips deductions, which round down. A $10,000 deduction is gone completely once modified AGI is more than $149,000 ($249,000 joint).
Which vehicles and loans qualify?
The vehicle must be new (original use starts with you), made primarily for public streets, roads and highways with at least 2 wheels, a car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds, and finally assembled in the United States. The loan must be taken out after December 31, 2024, be secured by a first lien on that vehicle and be for the purchase, for personal use. Fleet, commercial, salvage-title and scrap-or-parts loans and any lease financing are excluded, and so is a loan owed to a related person.
Do I have to itemize, and does it lower my AGI?
No, you do not have to itemize: the IRS says you can claim it whether you take the standard deduction or itemize. The deduction is subtracted from adjusted gross income to reach taxable income, so it does not lower your AGI or the modified AGI used for the phase-out. This calculator estimates federal income tax saved only as the deduction times the marginal rate you choose.
Does a lease, a used car, a refinance or a loan from a relative count?
Lease payments do not count, and neither does a used vehicle or a loan owed to a related person. A refinanced loan can count only if the original loan was taken out after December 31, 2024 to buy the vehicle and must itself qualify; the new loan must also be secured by a first lien on the same vehicle, and only up to the outstanding balance of the refinanced loan on the date of the refinancing counts. Refinancing a 2024 or earlier loan does not make it eligible. Loan amounts for things not customarily financed with a car, such as liability insurance, a trailer or negative equity from a trade-in, are not eligible either.
How do I claim it, and what is the VIN requirement?
You claim it on Schedule 1-A (Form 1040), Part IV, and the total goes on line 13b of the 2025 Form 1040 (line 13a on the 2026 draft form). You must put the vehicle identification number (VIN) of each vehicle on the return, or the interest is not treated as qualified. Your lender reports the interest to you: for 2025, in a statement made available by January 31, 2026 under Notice 2025-57, and from 2026 on Form 1098-VLI.
Does it lower my state income tax?
This calculator does not estimate state income tax. Whether your state allows a similar deduction depends on your state’s law, and the federal sources cited here cover federal income tax only, so check your state revenue agency.
Sources (checked October 28, 2026): Pub. L. 119-21, sec. 70203 (26 U.S.C. 163(h)(4), 63(b)(7), 6050AA), govinfo · 26 U.S.C. 163, Cornell Legal Information Institute (mirror) · IRS T.D. 10054, final regulations on the car loan interest deduction (Internal Revenue Bulletin 2026-39) · IRS Notice 2025-57: transitional reporting guidance for lenders · IRS Schedule 1-A (Form 1040), 2025 · IRS Schedule 1-A (Form 1040), 2026 early release draft (DO NOT FILE) · IRS Instructions for Form 1040 (2025) · IRS Instructions for Form 1098-VLI (12-2026), early release draft · IRS Fact Sheet FS-2025-03: tax deductions for working Americans and seniors · NHTSA VIN Decoder (the tool the IRS points to for plant of manufacture)