Tax guides
Can You Write Off Car Loan Interest on Your Taxes?
Short answer: yes — up to $10,000 per year, thanks to a new law covering tax years 2025–2028. Before this law, personal car loan interest was not deductible at all. Here's exactly when you qualify.
The 4 rules your car must pass
- New vehicle. You must be the first owner — used cars don't count.
- Finally assembled in the USA. The deciding factor for most people. A Honda built in Ohio qualifies; a Ford built in Mexico doesn't. Check your VIN here — it decodes your car's assembly plant in 60 seconds.
- Personal use. Not for business, fleet, or for-hire use.
- Qualifying loan. A first-lien auto loan originated after December 31, 2024.
There's also an income phaseout: it starts at $100,000 MAGI ($200,000 joint) and disappears at $150,000 / $250,000.
How much is it actually worth?
A deduction isn't a credit — it's worth your marginal tax rate × the interest. Example: $8,000 of yearly interest at a 22% bracket = $1,760 back. Run your own numbers with our free calculator.
What about business use or refinancing?
Business-use vehicle interest follows separate business-expense rules — see a CPA. Refinanced loans can still qualify as long as the loan remains a qualifying first lien tied to the original qualifying vehicle and the other rules hold. When in doubt, our full guide walks through the edge cases.
Common questions
Is car loan interest tax deductible in 2026?
Yes — for the first time in decades. A 2025 law created a temporary deduction of up to $10,000/year of car loan interest for tax years 2025–2028, if your vehicle is new, finally assembled in the USA, for personal use, and financed with a qualifying loan.
Can I deduct interest on a used car loan?
No. The new deduction only applies to NEW vehicles. Used-car loan interest remains non-deductible for personal use.
What if I use my car for business?
The new deduction is for personal-use vehicles. If you use the car for business, different rules apply — business-use interest may be deductible as a business expense instead. Talk to a CPA about your situation.
Do I need to itemize to deduct car loan interest?
No. The new car loan interest deduction works whether you itemize or take the standard deduction. It's claimed on the new Schedule 1-A.
Disclaimer: Estimates only — not tax advice. Tax rules are complex and change. Confirm your situation with a qualified CPA or tax professional before filing.
Estimates only — not tax advice. Tax rules are complex and change. Confirm your situation with a qualified CPA or tax professional before filing.