A new SUV with its window sticker in a showroom

The car loan interest deduction: who qualifies (2025–2028)

Last reviewed 2026-10-17

From 2025 through 2028 you can deduct up to $10,000 a year of interest on a loan for a new, US-assembled car, SUV, pickup, van, minivan or motorcycle that you bought mainly for personal use. You get it whether or not you itemize.

Quick test. All five must be true: (1) you bought the vehicle new; (2) its final assembly was in the US; (3) the loan was taken out after December 31, 2024 and is secured by the vehicle; (4) when you took out the loan, you expected more than half its use to be personal; (5) its gross vehicle weight rating is below 14,000 lb. Check your VIN for (2) and (5).

Which vehicles qualify

  • Types: cars, minivans, vans, SUVs, pickup trucks and motorcycles made mainly for use on public roads.
  • Weight: a gross vehicle weight rating (GVWR) below 14,000 lb (exactly 14,000 lb doesn't qualify). That covers virtually every car, SUV and light-duty pickup.
  • New only: the original use of the vehicle has to start with you. Used vehicles and lease buyouts don't qualify. A demonstrator the dealer held mainly for sale can still count as new for you, as long as your loan documents treat the vehicle as new.
  • Final assembly in the United States. This is the test that rules out many popular models. You can rely on the plant identified by your VIN or on the "final assembly point" printed on the window sticker. Where the parts came from doesn't matter; where it was finally assembled does.

Which loans qualify

  • The loan was taken out after December 31, 2024 to buy the vehicle.
  • It's secured by a first lien on that vehicle (a normal auto loan).
  • When you took out the loan, you expected the vehicle to be used more than 50% for personal purposes by you or your family. This is judged once, at the start; later changes in use don't undo it.
  • Refinancing a qualifying loan still counts, up to the balance that was refinanced. Refinancing a loan from 2024 or earlier doesn't create a qualifying loan.
  • Amounts usually financed along with the car, such as sales tax, title and registration fees, extended warranties and GAP coverage, count as part of the loan.

These don't qualify: leases, loans for used vehicles, fleet and commercial vehicle loans, loans for salvage-title vehicles or vehicles bought for scrap or parts, loans from a related person (such as a family member or your own business), and purchases on a credit card, which isn't secured by the vehicle. If you rolled negative equity from a trade-in into the new loan, or took cash out, the interest on that part isn't deductible.

How much you can deduct

  • Cap: $10,000 of interest per tax return, per year, whatever your filing status. A married couple filing jointly shares one cap.
  • Income phase-out: the deduction falls by $200 for every $1,000 (or part of $1,000) that your modified adjusted gross income is above $100,000, or $200,000 on a joint return. Single, head of household and married-filing-separately filers all use $100,000. With the full $10,000 of interest, the deduction is gone once income passes $149,000 ($249,000 joint).
  • Years: tax years 2025, 2026, 2027 and 2028.

Most borrowers pay well under the cap. Interest in the first year of a $40,000, five-year loan at 7% is about $2,600. Run your own numbers.

How to claim it

  1. Get your interest figure. For 2026 onward, lenders that receive $600 or more of interest on a qualifying loan send Form 1098-VLI by January 31. For 2025, lenders could provide a statement of the year's interest instead.
  2. Confirm the vehicle qualifies. Check your VIN for US final assembly.
  3. Report it on your return in Part IV of Schedule 1-A (Form 1040), including the vehicle's VIN, which the law requires. The deduction reduces taxable income rather than adjusted gross income, and you can take it with either the standard deduction or itemized deductions.

Nonresident aliens generally can't claim this deduction.

Common questions

My car was built in Canada or Mexico. Does it count?

No. The rule requires final assembly in the United States. Many popular models are built in more than one country, so check your own VIN rather than the model name.

Does it matter how much of the car is American-made?

No. The test is the final assembly location only. A car with mostly imported parts that's assembled in Kentucky qualifies; a car with mostly US parts that's assembled in Ontario doesn't.

I bought my car in 2024. Can I deduct the interest?

No. The loan has to originate after December 31, 2024, and refinancing a 2024 loan doesn't change that.

I use my car for rideshare driving. Does that rule me out?

Not necessarily. What matters is whether you expected more than half of the vehicle's use to be personal when you took out the loan.

Sources: Internal Revenue Code §163(h)(4), added by Public Law 119-21 (July 4, 2025); final regulations, T.D. 10054 (Federal Register, September 8, 2026); Schedule 1-A (Form 1040); IRS guidance on the deduction. This page summarizes the rules and isn't tax advice. Rules last reviewed 2026-10-17.