How much car loan interest can I deduct in 2025?

Up to $10,000 of interest per year on a qualifying new car loan. The deduction is reduced once modified AGI exceeds $100,000 (single/HoH) or $200,000 (married filing jointly), by $200 for every $1,000 over, and is fully phased out at $150,000 / $250,000.

Which vehicles and loans qualify?

The vehicle must be new (not used), have its final assembly in the United States, be for personal use, and have a gross vehicle weight rating under 14,000 pounds. The loan must originate after December 31, 2024 and be a first lien secured by the vehicle. Leased vehicles do not qualify.

Do I have to itemize to claim it?

No. The car loan interest deduction is above-the-line, so you can claim it whether you itemize or take the standard deduction. It is claimed on the new IRS Schedule 1-A, Part IV, where you also enter the vehicle's VIN.

How long is the deduction available?

For tax years 2025 through 2028. You can deduct qualifying interest paid each year during that window, as long as the loan and vehicle continue to meet the requirements.

OBBBA · 2025–2028

Car Loan Interest Deduction Calculator

Estimate the new auto-loan interest deduction from the One Big Beautiful Bill Act. Confirm your vehicle and loan qualify, then enter your interest and income — the calculator applies the $10,000 cap and the MAGI phase-out for tax year 2025.

Filing status

Car loan interest paid in 2025 (from your lender statement)

Modified AGI (your total income for the year)

Eligibility — all must be true to qualify

New vehicle (not used) Final assembly in the United States Loan originated after Dec 31, 2024 First-lien loan; vehicle for personal use (not leased) Gross vehicle weight rating under 14,000 lbs

Marginal tax bracket (optional — to estimate tax savings)

Estimated 2025 car loan interest deduction

Enter your interest and confirm eligibility to estimate the deduction.

Eligible interest (lesser of paid or $10,000)—

Phase-out begins (your status)—

Phase-out reduction—

Estimated federal income-tax savings—

How the car loan interest deduction works

Provision	Detail
Maximum deduction	$10,000 of car loan interest per year
Phase-out begins (MAGI)	$100,000 single / HoH · $200,000 married filing jointly
Phase-out rate	−$200 for each $1,000 of MAGI over the threshold (gone at $150,000 / $250,000)
Vehicle rules	New, U.S. final assembly, personal use, GVWR under 14,000 lbs
Loan rules	Originated after Dec 31, 2024; first lien securing the vehicle; not a lease
Tax years	2025 through 2028
How to claim	Schedule 1-A, Part IV (with the VIN) — above-the-line

Created by the One Big Beautiful Bill Act (OBBBA), this above-the-line deduction lets you deduct interest on a qualifying new car loan — whether or not you itemize. The catch is the eligibility: the vehicle must have its final assembly in the U.S., be for personal use, weigh under 14,000 lbs, and the loan must have originated after December 31, 2024 as a first lien on the vehicle. Leased vehicles and used cars don't qualify, and the phase-out is steep — $200 per $1,000 of MAGI over the threshold.

The deduction is claimed on the new Schedule 1-A, Part IV, where you enter the vehicle's VIN. For 2025, lenders received transition relief (Notice 2025-57) but should still provide a statement of total interest; in later years they'll issue a form similar to a 1098.

Questions

How much can I deduct?

Up to $10,000 of interest, reduced once MAGI passes $100,000 (single/HoH) or $200,000 (joint) by $200 per $1,000 over, and gone entirely at $150,000 / $250,000.

Which vehicles qualify?

New (not used), final assembly in the U.S., personal use, GVWR under 14,000 lbs, financed with a first-lien loan taken after Dec 31, 2024. Leases don't qualify.

Do I have to itemize?

No — it's above-the-line and works with the standard deduction. Claim it on Schedule 1-A, Part IV with the VIN.

How long is it available?

Tax years 2025 through 2028, as long as the loan and vehicle keep meeting the rules.

Estimate only, based on the One Big Beautiful Bill Act, IRS Notice 2025-57, and proposed regulations (which may change before they're final). The phase-out reduction is computed in whole $1,000 increments; the exact deduction is figured on IRS Schedule 1-A. Not tax advice and not affiliated with the IRS.