Car Loan Interest Deduction Calculator
You can deduct up to $10,000 of car loan interest each year if your income qualifies. The deduction phases out above $100,000 of modified adjusted gross income (MAGI), or $200,000 for married couples filing jointly. Every $1,000, or part of $1,000, of MAGI above those limits cuts the deduction by $200. The car loan interest deduction calculator below shows your allowed deduction, your phase-out reduction, and your federal tax savings.
For example, take a single filer with $95,000 of MAGI who pays $4,200 in interest on an eligible vehicle loan. Because income is under the $100,000 threshold, no phase-out applies. They deduct the full $4,200, which saves about $924 in federal tax at a 22% marginal rate. At $120,001 of MAGI, that same interest yields no deduction.
How it works
Under Internal Revenue Service (IRS) Publication 6126, you can deduct loan interest paid on an eligible vehicle bought from 2025 through 2028. The deduction is available to both itemizing and non-itemizing taxpayers, which you can compare in our standard vs itemized deduction guide. To qualify, the vehicle must be new, for personal use, and purchased after December 31, 2024. It must have a gross vehicle weight rating of less than 14,000 pounds and have undergone final assembly in the United States. Eligible types include cars, minivans, vans, sport utility vehicles, pickup trucks, and motorcycles. You must report the vehicle identification number (VIN) on your tax return. This deduction is not for used vehicles, vehicles assembled outside the United States, or interest you already deduct on Schedule C, E, or F, which is not counted.
The calculator follows the arithmetic on Part IV of Schedule 1-A (Form 1040). It takes the smaller of your interest paid or the $10,000 annual cap. For single filers, the phase-out starts by subtracting $100,000 from your MAGI. If that difference is greater than zero, the result is divided by $1,000 and rounded up to the next whole number. Multiplying that step count by $200 gives your deduction cut. In our internal modeling, we re-implemented the Schedule 1-A arithmetic in two separate programs and ran the scenarios below through both to see how income and the size of the loan interest change the deduction. The two programs agreed on every scenario, and you can enter the same inputs in the calculator above. For a single filer with $4,200 of interest, an income of $100,000 yields the full $4,200 deduction. At $105,000 of MAGI, the deduction drops to $3,200. At $110,000, it falls to $2,200. The deduction reaches $200 at an income of $120,000. It drops to $0 once MAGI hits $120,001.
Because the phase-out subtracts a flat $200 per step, a smaller interest total phases out at a lower income than a larger one. For a single filer with $12,000 of interest, line 24 caps the eligible interest at $10,000. That filer receives a $10,000 deduction at $100,000 of MAGI. Earning $100,001 triggers a full step and reduces the deduction to $9,800. The deduction falls to $5,000 at $125,000 of MAGI. It drops to $200 at $149,000 of MAGI. It reaches $0 at $149,001. The $2,000 above the cap never qualifies for a deduction. For married couples filing jointly with that same $12,000 interest, the threshold begins at $200,000. Their deduction drops to $200 at $249,000 of MAGI. It reaches $0 at $249,001 of MAGI.
The calculator estimates your interest or lets you enter the exact amount from your year-end lender statement. For example, consider a $45,000 loan balance at a 9% annual percentage rate (APR) with 72 months remaining. The first 12 payments account for about $3,809.58 in interest. You can explore financing terms using our auto loan interest calculator. Note that our tool assumes your vehicle and loan meet all legal qualifications. It does not figure state tax adjustments or include interest already claimed on Schedule C, E, or F. Check your marginal tax rate with our tax bracket calculator to see what your deduction saves.
For filers at or below $100,000 of MAGI, or $200,000 for joint returns, the deduction equals your eligible interest up to $10,000. Within the phase-out range, each additional $1,000 of MAGI eliminates $200 of deduction. At a 22% marginal tax rate, that lost deduction increases your tax bill by $44. If your vehicle was assembled abroad or your MAGI is at or above the zero point for your interest, your deduction is $0 regardless of loan interest. This calculator provides educational estimates rather than formal tax advice, and a preparer settles the individual case. Before buying your next vehicle, review common car loan mistakes to make sure your financing aligns with your budget.
Frequently asked questions
How much car loan interest can I deduct?
You can deduct up to $10,000 of interest each year on a qualifying vehicle loan. The deduction is capped at your actual interest paid or $10,000, whichever is less. Phase-out rules apply if your modified adjusted gross income (MAGI) exceeds $100,000, or $200,000 on a joint return. Each $1,000, or part of $1,000, of excess income reduces your deduction by $200.
What is the income limit for the car loan interest deduction?
The phase-out begins at $100,000 of MAGI for single filers and $200,000 for married couples filing jointly. Because each step removes $200 of deduction, the point where the benefit reaches $0 depends on your interest amount. For a single filer with $10,000 of interest, the deduction falls to $0 at $149,001 of MAGI (joint filers: $249,001). For a $4,200 interest total, the deduction falls to $0 at $120,001.
Does my car qualify for the car loan interest deduction?
Your vehicle qualifies if it is a new vehicle purchased after December 31, 2024, for personal use. It must have undergone final assembly in the United States and have a gross vehicle weight rating under 14,000 pounds. Qualifying types include passenger cars, minivans, vans, SUVs, pickup trucks, and motorcycles. You can check U.S. assembly by inspecting the dealer label or checking the VIN.
Do I need to itemize to deduct car loan interest?
No, you do not need to itemize deductions. Under IRS Publication 6126, the car loan interest deduction is available to both itemizing and non-itemizing taxpayers. You can claim it whether you take the standard deduction or itemize your return.
Can I deduct interest on a used car?
No, you cannot deduct loan interest on a used car. IRS Publication 6126 requires the vehicle to be new at the time of purchase. Because of this requirement, used vehicles do not qualify for the deduction.
How do I claim the car loan interest deduction?
You claim the deduction on Part IV of Schedule 1-A (Form 1040). You must list the vehicle identification number (VIN) and interest for each loan. The form applies the $10,000 cap and reduces the total if your income exceeds the phase-out limit.
Which tax years does the car loan interest deduction cover?
The deduction is available for tax years 2025 through 2028 under IRS Publication 6126. To qualify, the new personal vehicle must have been purchased after December 31, 2024.
What if I refinance my car loan?
Interest paid on a refinanced car loan is generally eligible for the deduction. Under IRS Publication 6126, interest paid on the refinanced amount generally qualifies.
Sources
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