Federal auto loan interest deduction overview

Under current federal tax law, qualifying buyers can deduct up to $10,000 each year in interest paid on an eligible auto loan. The deduction covers new, personally owned vehicles that are assembled in the United States and financed within the qualifying tax years.

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How the deduction works

You may be able to deduct as much as $10,000 each year in interest paid toward a qualifying auto loan.

Because the deduction reduces your taxable income, it can lower the total federal tax you owe.

This deduction applies to interest paid from 2025 through 2028 on loans originated after December 31, 2024.

Eligibility requirements

To qualify for the auto loan interest deduction, every one of the following conditions needs to be met:

  • The vehicle has to be purchased new, since used vehicles and leased vehicles don't qualify.
  • The loan must be secured by the vehicle itself and must have originated after December 31, 2024.
  • The vehicle must be for personal use only, not for business or commercial purposes.
  • You'll need to include the vehicle identification number (VIN) when you file your tax return.
  • If you refinance your loan, the interest may still qualify as long as the original loan met every requirement.
  • This is an above-the-line deduction, so you can claim it even if you don't itemize your deductions.

Qualifying vehicles

Vehicles that generally qualify include:

  • Passenger cars, SUVs, pickup trucks, vans, minivans, and motorcycles
  • Vehicles with a gross vehicle weight rating (GVWR) under 14,000 pounds
  • Vehicles that completed final assembly in the United States

Leased vehicles and used vehicles are not eligible for this deduction. You can confirm a vehicle's final assembly location using its VIN through an official database, such as the NHTSA VIN decoder.

Income limits and phase-out rules

How much you can deduct depends on your income and filing status:

  • Single filers earning up to $100,000 may qualify for the full deduction.
  • Married couples filing jointly earning up to $200,000 may qualify for the full deduction.
  • Incomes above these thresholds may still qualify for a partial deduction, up to $149,000 for single filers or $249,000 for joint filers.
  • Taxpayers earning above the phase-out range are not eligible for the deduction.

The deduction amount gradually decreases as income rises above the initial thresholds.

Additional information

  • All IRS requirements related to loan structure and vehicle eligibility must be satisfied.
  • This information is intended for general educational purposes only and isn't tax or legal advice. Talk with a qualified tax professional to find out how eligibility applies to your specific situation.