Car Loan Interest Deduction 2026
Deduct up to $10,000 of interest paid on a loan for a new, U.S.-assembled personal vehicle — even if you don't itemize.
What the car loan interest means in plain English
The One Big Beautiful Bill Act revives a deduction for personal car loan interest — something that hadn't been allowed since the 1980s. For tax years 2025 through 2028, you can deduct up to $10,000 of interest paid on a qualifying auto loan, claimed above the line on Schedule 1-A.
To qualify, the loan must be for a new (not used) personal-use vehicle whose final assembly took place in the United States, and the loan generally must have originated after December 31, 2024. The vehicle must be secured by the loan (a first-lien purchase loan), and lease financing does not qualify.
The deduction reduces income tax only and phases out at higher incomes — beginning at $100,000 MAGI for single filers and $200,000 for married couples filing jointly, reduced by $200 for every $1,000 above the threshold. You can verify U.S. final assembly using the NHTSA VIN decoder.
Estimate your car loan interest
Who qualifies
- The loan financed a new (not used) vehicle for personal use, originated after December 31, 2024.
- The vehicle underwent final assembly in the United States (confirm with the NHTSA VIN decoder).
- The loan is secured by the vehicle as a first lien — leases and unsecured loans do not qualify.
- Your MAGI is below the phase-out ceiling for your filing status.
Common mistakes to avoid
- Claiming interest on a used vehicle or a lease — only new, financed purchases qualify.
- Assuming any car qualifies — the vehicle must have final assembly in the U.S.
- Deducting interest on a loan that originated on or before December 31, 2024.
- Including interest on a business-use vehicle, which is handled under separate business rules.
Car Loan Interest FAQs
How much car loan interest can I deduct in 2026?
You can deduct up to $10,000 of interest paid on a qualifying new-vehicle loan for 2026. The deduction phases out starting at $100,000 MAGI (single) or $200,000 (married filing jointly), decreasing by $200 for every $1,000 of income above the threshold. Verify exact figures with IRS Schedule 1-A instructions.
Which vehicles qualify for the car loan interest deduction?
The vehicle must be new (not used), for personal use, and have undergone final assembly in the United States. You can confirm U.S. final assembly using the vehicle's VIN through the NHTSA VIN decoder. The loan must be secured by the vehicle and generally must have originated after December 31, 2024.
Does leasing a car qualify?
No. The deduction applies to interest on a purchase loan secured by the vehicle. Lease payments and lease-financing charges do not qualify.
Can I claim this if I take the standard deduction?
Yes. Unlike home mortgage interest, the car loan interest deduction is an above-the-line deduction claimed on Schedule 1-A, so you can take it whether you itemize or use the standard deduction.
IRS sources & verification
Last verified June 13, 2026.