Car Loan Interest Tax Deduction
You May Qualify for Car Loan Interest Tax Deduction
If you purchased a vehicle this year or are planning to soon, you may qualify for a new tax break that allows qualified buyers to deduct auto loan interest from their tax returns. The deduction will expire in 2028, so buyers can get the most benefit now.
Learn more below about who qualifies and which vehicles are eligible.
What is car loan interest deduction?
Eligible borrowers can deduct up to $10,000 in interest paid annually on qualifying loans from their taxable income.
What vehicles and loans can you deduct?
Eligible borrowers can deduct up to $10,000 in interest paid annually on qualifying loans from their taxable income.
What vehicles and loans can you deduct?
- New cars and SUVs purchased (not leased) on or after January 1, 2025.
- Vehicles assembled in the U.S.
- Vehicles purchased for personal use. Commercial or business vehicles are excluded.
- The auto loan must be secured through a dealer, bank, or credit union.
Who qualifies for the exemption?
- Individual filers with Modified Adjusted Gross Income (MAGI) of $100,000 or less and married couples filing jointly with a MAGI of $200,000 or less qualify for the full deduction.
- The auto loan deduction reduces by $200 for each $1,000 in income for people with MAGIs over those thresholds, and the deduction is not available for single filers earning more than $150,000 and married couples with incomes above $250,000.
Other stipulations apply, so we encourage you to consult your accountant or other tax professional to verify your eligibility and all additional details. Unsure if your vehicle was assembled in the U.S.? Use the National Highway Traffic Safety Administration VIN Decoder.
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Although every reasonable effort has been made to ensure the accuracy of the information contained in this site, absolute accuracy cannot be guaranteed. This site, and all information and materials appearing on it, are presented to the user "as is" without warranty of any kind, either express or implied. Confirm all information with your tax professional and reference the IRS website for complete information.