Individual tax planning
The new car-loan interest deduction has narrower rules than the headline suggests
For 2025 through 2028, eligible individuals may deduct up to $10,000 of interest on a qualifying loan for a new personal-use vehicle with final assembly in the United States.
The deduction is available to qualifying taxpayers whether they itemize or use the standard deduction, but it does not apply to leases, used vehicles, or ordinary business vehicles under the personal-use provision.
The loan must qualify
The loan generally must originate after December 31, 2024, be secured by a lien on the vehicle, and finance a new vehicle originally used by the taxpayer for personal purposes.
The vehicle must qualify
Eligible vehicles include specified cars, minivans, vans, SUVs, pickups, and motorcycles that meet the final-assembly and other statutory requirements. The vehicle identification number helps document eligibility.
Income can reduce the deduction
The annual deduction is limited to $10,000 and begins phasing out when modified adjusted gross income exceeds $100,000, or $200,000 for married taxpayers filing jointly.
Keep loan and vehicle records
Retain the purchase agreement, VIN, final-assembly evidence, loan origination documents, year-end interest statement, and any refinancing history. Separate personal-use interest from any independently deductible business-use portion.
Confirm the vehicle, loan, personal use, and income limits before assuming the interest is deductible. A purchase advertisement or lender statement alone may not establish every requirement.
Apply the guidance to your facts
Discuss the accounting and tax decisions behind the form.
We begin with the records, entity structure, timing, and decisions that apply to your situation.
Schedule a complimentary callThis article provides general educational information and is not individualized accounting, legal, investment, or tax advice. Tax rules and forms change; confirm the current requirements for your facts before acting.