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Car Loan Interest Deduction Calculator

How much of the interest on a new car loan you can deduct for 2025 to 2028, up to $10,000 a year, after the income phase-out, and the tax it saves.

You can deduct $2,400 of car loan interest, which saves about $528 of federal income tax at 2026 rates.

Your deduction
$2,400
Federal income tax saved
$528
Most you could deduct
$10,000
Lost to the income phase-out
$0

The deduction on $3,000 of car loan interest, by income

Modified AGISingleJoint
$60,000$3,000$3,000
$100,000$3,000$3,000
$105,000$3,000$3,000
$110,000$3,000$3,000
$115,000$3,000$3,000
$200,000$0$3,000
$215,000$0$3,000

How this calculator works

Interest on a qualifying loan is deductible up to $10,000 a year (26 U.S.C. 163(h)(4)). The cap falls by $200 for each $1,000, or part of $1,000, of modified AGI over $100,000 ($200,000 joint), so it is gone at $150,000 ($250,000 joint).

Deductions lower federal taxable income whether you itemize or take the standard deduction. They don't lower Social Security or Medicare tax, and states decide for themselves whether to follow them.

The tax saved is estimated at 2026 federal rates with the standard deduction, treating your modified AGI as your income.

What it assumes

  • The loan must be taken out after 2024 to buy a new car, SUV, van, pickup or motorcycle for personal use, with final assembly in the United States, secured by the vehicle. Leases and used vehicles don't qualify.
  • You must report the vehicle identification number (VIN) on your return.

Questions people ask

Is car loan interest tax deductible now?

For 2025 through 2028, yes, on a loan for a new, US-assembled vehicle for personal use taken out after 2024: up to $10,000 of interest a year.

Do used cars or leases qualify?

No. The vehicle's original use must start with you, and lease payments don't count.

How do I know if my car was assembled in the US?

The window sticker lists the final assembly point, and the VIN decoder from the National Highway Traffic Safety Administration shows the plant.

Is there an income limit?

The $10,000 cap falls by $200 for each $1,000 (or part) of modified AGI over $100,000, or $200,000 for joint filers.

How much does it save?

A single filer with $70,000 of income and $2,400 of interest saves about $528 of federal income tax.

Related calculators

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  • APR CalculatorA loan's APR counts its fees as well as its interest rate. Enter the rate, term and upfront fees to see the true yearly cost and the monthly payment.
  • Paycheck CalculatorWhat you take home from each paycheck after federal income tax, Social Security, Medicare and state income tax, with 2026 tax rates for every state.

Sources

Updated by the RateHerald team. The maths is tested against worked examples; report a problem.

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