01/20/2026
No tax on car loan interest (Section 70203)
Overview of the new deduction
Effective 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use that meets other eligibility criteria. Lease payments do not qualify.
Maximum annual deduction is $10,000.
Phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
What counts as qualified interest
Interest must be paid on a loan that:
Originated after December 31, 2024
Was used to purchase a vehicle originally used by the taxpayer
Was secured by a lien on the vehicle
Was for a personal-use (nonbusiness) vehicle
If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.
What counts as a qualified vehicle
A qualified vehicle is a car, minivan, van, SUV, pickup truck or motorcycle that:
Has a gross vehicle weight rating of less than 14,000 pounds
Underwent final assembly in the United States.
To verify final assembly, check one of these:
The vehicle label at the dealership
The vehicle identification number (VIN)
The National Highway Traffic Safety Administration, NHTSA VIN Decoder (verify vehicle assembly location)
Who qualifies
Available to both itemizing and non-itemizing taxpayers.
You must include the VIN on your return for any year you claim the deduction.
Reporting requirements
Lenders or other recipients of qualified interest must file information returns with the IRS and provide statements to taxpayers showing the total amount of interest received during the taxable year.
