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Car Loan Interest Deduction Calculator

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Enter your annual car loan interest paid and MAGI to estimate your federal deduction for a new, US-assembled vehicle under the One Big Beautiful Bill Act (OBBBA), for tax years 2025-2028.

Car Loan Interest Deduction Calculator

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Deductible interest
$4,800
Max allowed (after phase-out)
$10,000
Based on IRC Section 163(h)(4) (OBBBA), tax years 2025-2028. Vehicle must be new (not used), personal-use, and finally assembled in the US - check the VIN or window sticker. Not tax advice.

The formula

Max deductible cap: $10,000 (same for single and joint filers), reduced by $200 per $1,000 of MAGI above the threshold Threshold: $100,000 (Single/HoH) or $200,000 (Married Filing Jointly) Fully phased out: $150,000 (Single/HoH) or $250,000 (MFJ) Deductible amount = the SMALLER of your actual interest paid or the effective cap
Example

Single filer, MAGI $110,000, interest paid well above the cap: $10,000 over the threshold means a $2,000 reduction, leaving a maximum deductible amount of $8,000 - even if your actual interest paid was higher.

Step-by-step guide

  1. Confirm your vehicle qualifies - new (not used), assembled in the US (check the VIN or window sticker), under 14,000 lbs, purchased for personal use after December 31, 2024.
  2. Enter the total interest you paid during the tax year (from your lender's Form 1098) and your filing status and MAGI.
  3. Read your deductible amount - this is above-the-line, available whether you itemize or take the standard deduction.

Why "assembled in the US" trips up more buyers than expected

This requirement isn't about the brand name on the vehicle - it's specifically about where final assembly happened. Many foreign brands (Toyota, Honda, BMW, and others) operate US assembly plants and can qualify, while some models from American brands are actually assembled outside the US and would NOT qualify. The only reliable way to confirm is checking the specific vehicle's VIN or window sticker for its assembly location - the brand alone tells you nothing definitive. Used vehicles never qualify regardless of where they were assembled, even a US-assembled used car purchased today.

Common mistakes

Assuming any American brand automatically qualifies - what matters is final assembly location for that specific vehicle, not the brand's national origin. Check the VIN, don't assume.
Confusing the single and MFJ phase-out ranges - unlike the dollar cap (which stays $10,000 regardless of filing status), the income thresholds are meaningfully different: $100k-150k single versus $200k-250k joint.

Frequently asked questions

Does a leased vehicle qualify for this deduction?

No - only vehicles purchased with a bona fide auto loan qualify. Lease payments, even on a qualifying US-assembled vehicle, don't count toward this deduction.

Does my state also give me a tax benefit for this deduction?

It depends entirely on your state - many states have not adopted (conformed to) this federal deduction, meaning your state taxable income may be unaffected even though your federal return benefits. Check your specific state's current rules.

Does the vehicle have to be brand new, or can it be a recent used car?

It must be new - used vehicles do not qualify under this provision, regardless of how recently they were manufactured or where they were assembled.

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