Car loan interest deduction in 2026: which vehicles and loans qualify
The OBBBA created a deduction for interest on a loan for a new personal-use vehicle that was assembled in the United States. It is worth up to $10,000 a year for tax years 2025 through 2028, and you do not need to itemize.
| Key fact | 2026 rule |
|---|---|
| Maximum deduction | $10,000 of interest per year |
| Phase-out starts | MAGI over $100,000 ($200,000 joint) |
| Phase-out rate | $200 less deduction per $1,000 of MAGI over the threshold |
| Tax years | 2025–2028 |
| Need to itemize? | No |
| Form | Schedule 1-A |
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Which vehicles qualify
- New (original use starts with you) — used vehicles do not qualify.
- Final assembly in the United States.
- A car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds.
- Bought for personal use, not business use.
Which loans qualify
The loan must have been taken out after December 31, 2024, and be secured by a lien on the vehicle. Leases do not qualify. Refinancing a qualifying loan can still qualify if the new loan only replaces the old one.
Worked example
Sam buys a new US-assembled SUV with a $35,000 loan and pays about $2,300 of interest in the first year. With a $85,000 single-filer MAGI there is no phase-out, so the full $2,300 is deductible. At a 22% marginal rate the savings are about $506.
If Sam's MAGI were $108,000, the deduction would drop by $200 for each $1,000 over $100,000 — $1,600 — leaving $700.
Reporting requirements
You must put the vehicle identification number (VIN) on your return, and lenders report the interest they received. Keep your year-end loan statement, the window sticker and the purchase agreement. You can check final assembly with the plant code in the VIN or the NHTSA decoder.
Frequently asked questions
Does a used car qualify?
No. Original use must begin with you.
Can I deduct interest if I take the standard deduction?
Yes. This is a deduction that does not require itemizing.
Do leases qualify?
No. Only interest on a loan secured by the vehicle.
What if I bought the car in 2025?
If the loan began after December 31, 2024 and the other rules are met, you can claim interest paid in 2025 and later years through 2028.
Schedule 1-A · Phase-outs · Checklist · Auto Loan Interest Calculator
This article is educational information, not tax advice. Rules can change and your situation may differ. Confirm details on IRS.gov or with a tax professional. Figures reflect law and IRS guidance as of 2026-10-21. See our methodology.