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Car Loan Interest Deduction Calculator for 2026 and 2027

Last reviewed November 14, 2026 · Figures checked against official sources · How we verify

Short answer: You can deduct up to $10,000 a year of interest on a loan for a new, personal-use vehicle that was assembled in the United States, if the loan started after December 31, 2024. The deduction phases out above $100,000 MAGI ($200,000 joint). Leases and used cars do not qualify.

Car loan interest deduction calculator

$
Vehicle price financed, not including negative equity rolled in from an old loan.
Percent per year, e.g. 7.5
12 for a full year. Interest paid in the year is estimated starting from the first payment.
0 if the loan began this year; e.g. 12 if this is the second year of the loan.
Married people must file jointly to claim these deductions.
$
Adjusted gross income (Form 1040 line 11b) plus any excluded foreign or Puerto Rico income. Use your best estimate.

How the car loan interest deduction is calculated

This calculator follows Part IV of Schedule 1-A:

  1. Total your qualified interest for the year across up to two vehicles (Schedule 1-A has lines for two VINs).
  2. Apply the cap: the smaller of your interest or $10,000.
  3. Phase-out: if MAGI exceeds $100,000 ($200,000 joint), subtract the threshold, divide by $1,000, round up to the next whole number, and multiply by $200.
  4. Subtract the reduction from the capped amount (not below zero).

Note the difference from the overtime and tips deductions: the car loan phase-out rounds up and uses $200 per $1,000, so it removes the deduction faster. A $10,000 deduction is fully phased out when MAGI reaches $150,000 for single filers or $250,000 for joint filers.

Worked examples

Example 1: new U.S.-assembled SUV, single filer

A single filer finances $38,000 at 7.5% APR for 72 months. In the first 12 payments, the amortization schedule shows about $2,673 of interest. MAGI is $88,000 for 2026.

  • Under the cap and below $100,000: deduction $2,673.
  • Taxable income before: $71,900 (22% marginal rate). Estimated federal tax savings: $588.

Example 2: joint filers just over the threshold

A couple paid $4,000 of interest and has MAGI of $205,500.

  • Excess over $200,000: $5,500 ÷ $1,000 = 5.5 → rounds up to 6.
  • Reduction: 6 × $200 = $1,200. Deduction: $4,000 − $1,200 = $2,800.

Example 3: interest over the cap

A buyer with a very large loan paid $12,400 of interest, with MAGI of $90,000 (under the threshold). The deduction is capped at $10,000.

What to confirm before you claim it

Why this calculator says “estimate”

Your lender's year-end statement is the best number to use. The loan-based estimate here assumes a fixed-rate, fully amortizing loan with equal monthly payments; real loans with fees, add-ons, deferred payments or interest rebates can differ.

Frequently asked questions

How much car loan interest can I deduct?

Up to $10,000 a year for tax years 2025 through 2028. The deduction phases out for taxpayers with modified AGI over $100,000 ($200,000 for joint filers): $200 for each $1,000, or part of $1,000, of excess MAGI.

Which vehicles qualify?

A new car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds, that went through final assembly in the United States and is for personal use. Used vehicles don't qualify, and neither do leases.

Does the loan have to be new?

The loan must have been originated after December 31, 2024, be used to purchase the vehicle, and be secured by a lien on it. The IRS says the original use of the vehicle must start with you, so used vehicles don't qualify.

Can I deduct interest if I refinanced?

Generally yes, for interest on the refinanced amount. The final regulations limit the refinanced loan to the outstanding balance of the original qualifying loan, so cash taken out in a refinance isn't qualified interest.

Does negative equity from a trade-in count?

No. The final regulations (TD 10054) say indebtedness attributable to negative equity from a prior vehicle loan is not incurred for the purchase of the new vehicle, so interest on that portion is excluded.

How do I know if my vehicle was assembled in the U.S.?

The IRS says the vehicle information label on the car at the dealer shows the final assembly location. You can also use the plant of manufacture in the VIN, via the NHTSA VIN Decoder.

Do I need to itemize?

No. The deduction is available whether you itemize or take the standard deduction. You must include the vehicle's VIN on your return.

Will my lender report the interest?

Yes. Lenders that receive $600 or more of interest on a specified passenger vehicle loan in the course of a trade or business are required to file information returns and give you a statement, under the final regulations effective November 9, 2026.

Sources and citations

Every dollar figure on this page was checked against the official pages below on November 14, 2026. If an agency updates its guidance, the agency page controls.

  1. IRS Fact Sheet FS-2025-03: Working Families Tax Cuts — Tax deductions for working Americans and seniors
  2. IRS Tax Tip 2026-79: Purchasing a new vehicle? Car loan interest could be eligible for a tax deduction
  3. Federal Register: Car Loan Interest Deduction (final regulations TD 10054, effective Nov. 9, 2026)
  4. 2025 Schedule 1-A (Form 1040), Additional Deductions (IRS)
  5. Instructions for Form 1040 (2025), including Schedule 1-A instructions (IRS)