Car Loan Interest Deduction Calculator (2025–2028)

1. Pick your filing status and the tax year. The deduction exists only for 2025 through 2028, so any other year returns zero.
2. Enter the car loan interest you paid this year and your MAGI. Add your marginal tax rate if you want a savings estimate.
3. Answer the six eligibility questions about the vehicle and loan. If any is "No", the deduction is $0. Read the deductible interest, the phase-out cut, and the verdict band.

The car loan interest deduction, nicknamed "no tax on car loan interest," is a new federal income tax deduction created by Public Law 119-21 (the 2025 reconciliation act), which added Internal Revenue Code section 163(h)(4). It lets eligible buyers subtract up to $10,000 of interest paid on a loan for a new, personal-use vehicle.

It is temporary. The IRS says the deduction applies only to tax years 2025 through 2028, for loans originated after December 31, 2024. Unless Congress extends it, the deduction disappears for tax years that begin on or after January 1, 2029.

You can claim it whether you take the standard deduction or itemize, because it is an above-the-line deduction. It is reported on Schedule 1-A, Part IV, and you must list the vehicle identification number (VIN) on your return for any year you claim it. It is a cousin of the no tax on tips deduction and the no tax on overtime deduction, which share the same Schedule 1-A and the same style of income phase-out.

The calculator follows the three-step arithmetic in Schedule 1-A, Part IV, in order.

The threshold is $100,000 for most filers, or $200,000 on a joint return. If MAGI is at or below the threshold, there is no reduction.

1. Step 1, the cap. Take the smaller of the interest you paid and $10,000. This is a per-taxpayer, per-year limit.
2. Step 2, the phase-out. Subtract the threshold from your MAGI. Divide the excess by $1,000 and round up to a whole number, because the law reduces the deduction for each $1,000 "or portion thereof." Multiply by $200.
3. Step 3, the deduction. Subtract the reduction from the capped interest. A negative result becomes $0. If any eligibility check fails, or the year is outside 2025 to 2028, the deduction is $0.

Because the cap is $10,000 and each full $1,000 of excess income removes $200, a buyer claiming the full cap loses it entirely at $150,000 of MAGI (single) or $250,000 (joint), which is the threshold plus $50,000. A smaller interest amount reaches $0 sooner.

Every number below was computed in code from the step rules above.

The first case is the worked example from our verified data file: a single filer at $120,000 of MAGI with $6,000 of interest ends up with a $2,000 deduction after the $4,000 phase-out.

Eligibility is strict. Every condition below must be true, or the deduction is zero. The IRS confirms these rules on its "What you will need to file" and car loan interest guidance pages. This tool asks about each one instead of guessing from a vehicle list.

You must also report the VIN on your return for each year you claim the deduction. Keep your lender statements and the window sticker with your tax records.

What MAGI Means Here

MAGI is your adjusted gross income increased by amounts excluded under IRC sections 911, 931, and 933 (foreign earned income and U.S. territory exclusions). For nearly all domestic filers, MAGI equals AGI from Form 1040 line 11.

How the Phase-Out Bites

Every $1,000 of MAGI over the threshold, or any part of $1,000, removes $200 of deduction. Because the law rounds the steps up, being even one dollar over the threshold triggers a full $200 step. The threshold is $100,000 for most filers and $200,000 for a joint return.

Where It Reaches Zero

With the full $10,000 cap, the deduction is gone at $150,000 (single) or $250,000 (joint). If you paid less interest, the deduction reaches zero at a lower income, because there is less to phase out.

Because this is an above-the-line deduction, it lowers taxable income no matter whether you itemize. For how a lower taxable income flows into your paycheck math, see how to calculate take-home pay.

The Tax Year

This is the first thing to check. The deduction exists for 2025 through 2028 only. A loan originated in 2024 or earlier, or interest paid in 2029 or later, does not qualify.

How Much Interest You Paid

Only interest counts, not principal, and only up to $10,000 a year. Early in a loan, when interest is highest, you are more likely to reach the cap.

Your MAGI and Filing Status

The threshold doubles for a joint return, from $100,000 to $200,000, but the $10,000 cap does not change. A raise or a bonus can push your MAGI up and shrink the deduction.

Vehicle and Loan Facts

A used vehicle, a non-U.S. final assembly point, a business-use purchase, a heavy vehicle, or a lease each zero out the deduction on their own.

Your Tax Rate

The deduction times your marginal rate is the rough income tax saving. A $2,000 deduction saves about $240 at 12 percent, or $480 at 24 percent. If you are self-employed, pair this with the self-employment tax calculator.

A deduction and a credit are not the same, and the difference matters for how much you save.

So the headline $10,000 is a ceiling on the deduction, not a check in the mail. Your actual saving depends on your bracket and your MAGI.

Before You Buy

Run the numbers before signing, so you know whether a specific new vehicle and loan would qualify and how much the interest might save you at your income.

At Tax Time

Use your year-end lender statement for the interest figure and your draft Form 1040 for MAGI, then compare the result with Schedule 1-A, Part IV.

When Your Income Changes

If a raise pushes your MAGI toward the threshold, the tool shows how fast the deduction shrinks, which helps with withholding planning.

1. Deducting the Whole Payment

Only the interest portion qualifies, not the principal. Use the interest total from your lender.

2. Assuming a Used Car Counts

The original use must begin with you. Used vehicles are excluded.

3. Skipping the Final-Assembly Check

The vehicle must be assembled in the U.S. Decode the VIN at vpic.nhtsa.dot.gov and read the window sticker before you assume it qualifies.

4. Forgetting the Income Phase-Out

Over the threshold, the deduction drops by $200 per $1,000 of MAGI, rounded up. High earners may get little or nothing.

5. Using a Lease or an Old Loan

Leases do not qualify, and the loan must be originated after December 31, 2024, and secured by a first lien.

6. Leaving Off the VIN

You must report the VIN on the return for each year you claim the deduction.

The calculator reproduces the Schedule 1-A, Part IV arithmetic for one vehicle and one loan. It is an educational estimate, not a tax return.

Up to $10,000 of interest paid during the year on a qualifying new, personal-use vehicle loan, for tax years 2025 through 2028, before the income phase-out. The cap is per taxpayer, per year.

Tax years 2025, 2026, 2027, and 2028 only, for loans originated after December 31, 2024. It expires for tax years beginning on or after January 1, 2029 unless Congress extends it.

The deduction shrinks by $200 for every $1,000, or part of $1,000, of MAGI over $100,000 ($200,000 on a joint return). With the full $10,000 cap, it reaches $0 at $150,000 single or $250,000 joint.

No. It is an above-the-line deduction, so you can claim it whether you take the standard deduction or itemize. It is reported on Schedule 1-A, Part IV.

No. The original use of the vehicle must begin with you, so used vehicles are excluded. The vehicle must also have its final assembly in the United States.

Decode the vehicle VIN with the NHTSA decoder at vpic.nhtsa.dot.gov and read the "Final Assembly Point" line on the window sticker. DOE fueleconomy.gov can also help. This tool does not keep a vehicle list.

A car, minivan, van, SUV, pickup truck, or motorcycle with a gross vehicle weight rating under 14,000 lb, bought for personal use. Business, commercial, and fleet vehicles do not qualify.

Leases generally do not qualify, and the loan must be secured by a first lien and originated after December 31, 2024. A qualifying refinance can count up to the original principal; related-party loans generally do not.

No. The interest stays part of what you paid your lender. You subtract qualifying interest on Schedule 1-A, so the saving equals the deduction times your marginal income tax rate.

Yes. You must report the vehicle identification number on your tax return for any year you claim the deduction. Keep your lender statements and window sticker as records.

No. The calculation runs in your browser and nothing is sent to our servers. Anything you choose to Save stays in this browser only.

• Working Families Tax Cuts: tax deductions for working Americans and seniors ($10,000 car loan interest cap) (IRS, OBBBA provisions, effective tax years 2025 to 2028, read 2026-10-04).
• One, Big, Beautiful Bill provisions: individuals and workers (MAGI thresholds, personal use, loan rules) (IRS, 2025, read 2026-10-04).
• Treasury, IRS provide guidance on the new deduction for car loan interest (above-the-line, Schedule 1-A Part IV) (IRS, December 31, 2025, read 2026-10-04).
• What you will need to file your taxes under the One, Big, Beautiful Bill (new/original use, GVWR, VIN) (IRS, 2025 to 2026, read 2026-10-04).
• Car Loan Interest Deduction, proposed regulations and enacted law IRC section 163(h)(4) ($200 per $1,000 rate, MAGI definition) (Federal Register January 2, 2026; PL 119-21 enacted 2025; page returned a redirect, so rate cited to the statute; read 2026-10-04).