A new federal rule lets eligible taxpayers deduct up to $10,000 per year in interest on a qualifying new, U.S.-assembled personal vehicle loan for tax years 2025–2028. You can take this whether or not you itemize.
What This Means
- What you can deduct: Up to $10,000 of interest paid on a qualifying car (or SUV, pickup, minivan/van, or motorcycle) loan each year. This is an above-the-line deduction, so you can claim it with the standard deduction.
- Who gets the full amount: Taxpayers with modified AGI ≤ $100,000 (single) or ≤ $200,000 (married filing jointly). Above those, the deduction drops by $200 for every $1,000 (or part) over the limit.
- When it applies: Loans incurred after Dec 31, 2024; deduction available for 2025–2028 tax years.
What Qualifies
The vehicle must be:
- Brand new (original use starts with you; used vehicles don’t qualify).
- Final assembly in the United States.
- Light vehicle (GVWR under 14,000 lbs): car, minivan/van, SUV, pickup, or motorcycle.
The loan must be:
- Incurred after 12/31/2024.
- Secured by a first lien on the vehicle.
- For personal (not commercial) use.
- NOT from a related party (like a family loan).
- Leases, fleet/commercial loans, salvage-title purchases, and vehicles assembled outside the U.S. don’t qualify.
How to check “final assembly in the U.S.”
- Look at the window label on the car at the dealer, it lists the final assembly location.
- Or use the NHTSA VIN Decoder to confirm plant of manufacture from the VIN.
What You Must Put on Your Return
You’ll need to enter the vehicle’s VIN on the tax return for any year you claim the deduction. Lenders will also send information returns with your annual interest amount beginning with 2025 loans (the IRS offers transition relief during rollout).
Planning Tips
- Time purchases inside the 2025–2028 window if a new vehicle is on your horizon.
- Compare financing vs. cash: this deduction reduces the effective cost of interest. Run the numbers before you decide.
- Keep records: purchase docs, loan contract (showing first lien), total interest paid, VIN, and proof of U.S. final assembly.
Why This Matters Now
- This is temporary: The benefit expires after 2028, so timing matters.
- Requirements are specific: Not all vehicles or loans qualify, so verification is important.
- Income limits apply: Higher earners get reduced or no benefit, affecting purchase decisions.
Ready to see if your vehicle purchase qualifies? Contact us to verify whether your current or planned vehicle purchase qualifies for the car loan interest deduction and to calculate your potential tax savings.
