Car loan interest deduction: rules for new US-assembled cars

Can I deduct car loan interest? Vehicle and loan requirements

Before 2025, interest on a personal car loan was never deductible. The car loan interest deduction changes that for four tax years, but only for a narrow set of purchases. Every requirement below must be met, or none of the interest counts.

Which vehicles qualify

An eligible vehicle is a car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds. It must be new, meaning the original use starts with you, and its final assembly must have taken place in the United States. It must be bought for personal use, not for business or commercial use.

Which loans qualify

The loan must be originated after December 31, 2024, used to buy the vehicle, and secured by a lien on it. Interest on a later refinance of a qualifying loan generally still counts. Leases do not qualify, and neither does a personal loan or home equity line used to pay for the car, since those are not secured by the vehicle.

Do used cars qualify for the deduction?

No. A used vehicle fails the original-use test even if it is only a year old and was assembled in the US. The purchase price, loan terms and your income do not change that result.

• Does not qualify: a 2023 pickup bought used in 2026 with a new loan.
• Generally does not qualify: a new car bought in 2024 with a 2024 loan, even if refinanced in 2026, because the purchase debt predates 2025.
• Does not qualify: a new car you lease, or one titled to your business.
• Qualifies: a new SUV assembled in the US, bought in March 2026 with a dealer loan secured by the vehicle.

Car loan interest deduction phase out and limit

The $10,000 cap is per return, not per vehicle, so two qualifying loans on a joint return still share one limit. Schedule 1-A has room for two VINs on line 22; more vehicles need the instructions.

This phaseout is steeper than the tips and overtime versions and rounds the other way. Subtract $100,000 ($200,000 joint) from modified AGI, divide by $1,000 and round any fraction up to the next whole number, then multiply by $200. A full $10,000 deduction is gone at $150,000 of modified AGI for a single filer and $250,000 for a joint return.

Worked example: joint filers just over the threshold

A married couple's lender statement shows $2,450 of interest paid in 2026 on a qualifying new SUV. Their modified AGI is $204,500. The excess of $4,500 becomes 5 after rounding up, so the reduction is $1,000 and the deduction is $1,450. In the 22% bracket that saves about $319. At $212,500 of modified AGI the $2,600 reduction would wipe out the deduction.

US final assembly check with the VIN

Final assembly location is not the same as the brand's home country. Some foreign brands assemble vehicles in the US, and some US brands assemble models abroad. Check the specific vehicle you bought.

1. Look at the vehicle information label on the window sticker of a new car, which lists the final assembly point.
2. Or enter the 17-character VIN in the NHTSA VIN Decoder website and read the plant of manufacture field.
3. Save a screenshot or copy of the result with your tax records.
4. Write the VIN on Schedule 1-A line 22. The deduction is not allowed without it.

Car loan interest deduction 2026: claiming it and records to keep

Lenders must file an information return showing the interest you paid on a qualifying loan, so expect a year-end statement from your lender. Compare it with your payment history, because only interest paid or accrued during 2026 belongs on the 2026 return.

• Purchase contract showing the date, new-vehicle status and price
• Loan agreement showing the origination date and lien on the vehicle
• Lender's 2026 interest statement
• Window sticker or NHTSA VIN decoder result for final assembly
• Any refinance papers linking the new loan to the original one

The deduction is taken after AGI on Schedule 1-A, so it works with the standard deduction. To reduce withholding during the year, list the expected amount in Step 4(b) of Form W-4. The other new deductions are summarized on the One Big Beautiful Bill tax changes hub. Retirees buying a car may also qualify for the senior deduction, and hourly workers should check does overtime get taxed more for how extra pay affects withholding.