The new deduction for car loan interest, worked out exactly the way Schedule 1-A works it out: up to $10,000 a year of interest on a loan for a new vehicle, finally assembled in the United States, taken out after 2024 — for tax years 2025 through 2028.
Did you borrow to buy the vehicle, or lease it?
Only a loan counts. Lease payments are not interest and are excluded expressly.
When did the loan start?
The loan must have been originated after December 31, 2024. A refinance of a qualifying loan generally keeps its eligibility.
Was the vehicle new when you bought it?
Its original use must begin with you — a used vehicle does not qualify, however recent the loan.
Where was the vehicle finally assembled?
Final assembly must be in the United States. The window sticker and the driver’s-door label state the assembly point, and the IRS publishes a list of qualifying vehicles.
Use the interest statement your lender furnishes (required for loans over $600 of interest). Leave out any interest you deduct on Schedule C, E or F — Schedule 1-A subtracts that part.
For most people MAGI is simply your AGI (Form 1040, line 11) — the Schedule 1-A version only adds back a few foreign-income exclusions. Include the income you are deducting; the phase-outs run off this figure.
Your car loan interest deduction
$4,200
From $4,200 of qualifying interest at a MAGI of $68,000 (Single, tax year 2025).
Counted after the cap
$4,200
Your cap
$10,000
Phase-out cut
−$0
You deduct
$4,200
Your MAGI is $68,000. The deduction is whole until $100,000 and fully gone at $149,001.
| Line | Amount |
|---|---|
| Qualified vehicle loan interest for the year line 23 | $4,200 |
| Deduction cap line 24 | $10,000 |
| Your MAGI line 3 | $68,000 |
| Phase-out starts at line 26 | $100,000 |
| Income over the threshold line 27 | $0 |
| $1,000 steps over — part of a step counts too line 28 | 0 |
| Phase-out cut ($200 per step) line 29 | −$0 |
| Your car loan interest deduction line 30 | $4,200 |
This deduction has the longest checklist of the four. Every item on it is a hard gate:
Three “news” must all hold: a new vehicle whose original use begins with you, bought with a loan originated after December 31, 2024. Miss any one and the deduction is $0 — there is no partial credit.
Source: IRS newsroom, One Big Beautiful Bill provisions — individuals and workers.Where the car was screwed together last is what counts — not the brand. A US brand built in Mexico fails; a foreign brand built in Tennessee or Alabama passes. Check the door label or the IRS list.
Source: IRS guidance on qualified passenger vehicle loan interest (IR-2025-129).Leases are out. The vehicle must be for personal use (business-deducted interest is carved out on the form) and weigh less than 14,000 lbs GVWR — ordinary cars, SUVs, pickups and minivans all qualify.
Source: Schedule 1-A (2025), Part IV and its instructions.From MAGI of $100,000 ($200,000 joint) the deduction loses $200 for every $1,000 or part of $1,000 over — earn one dollar past the threshold and a whole $200 step is gone. At the $10,000 cap it is fully out by $149,001 of MAGI.
Source: Schedule 1-A (2025), Part IV, lines 26–29.A single filer buys a new, Ohio-assembled SUV in March 2025 with a loan and pays $4,200 of interest during the year; her MAGI is $68,000. Part IV takes the smaller of her interest or $10,000 ($4,200), checks MAGI against the $100,000 threshold (she is under it — cut $0) and gives her the full $4,200 on line 30.
At a MAGI of $101,000 the story changes fast: the excess is $1,000 — exactly one step — so the cut is $200. At $100,001 the excess is $1, but line 28 rounds up to a whole step, so the cut is still $200. This is the only one of the four deductions that rounds against you, and the calculator above reproduces it exactly.
The ways this deduction comes back $0 — the calculator tests all of them:
Lease payments contain no deductible interest under this rule. Only a genuine loan qualifies.
Loans originated in 2024 or earlier never qualify, even on a brand-new car bought in late 2024.
Original use must begin with you, and final assembly must be in the United States. Either failure ends it.
Any car, minivan, SUV or pickup whose final assembly was in the United States and which weighs under 14,000 lbs. The brand does not matter — plenty of foreign brands build in the US and plenty of US brands build abroad. The window sticker (Monroney label) and the driver’s-door jamb label both state the final assembly point.
Generally yes — interest on a loan that refinances a qualifying loan keeps its character, as long as the original loan qualified. The IRS addresses refinances in its guidance; a cash-out refinance that enlarges the loan beyond the vehicle’s financing is where it gets complicated.
Only the personal-use part. Interest you deduct on Schedule C, E or F is entered in column (ii) of Part IV and subtracted before the cap — you cannot deduct the same interest twice.
No. Like the other Schedule 1-A deductions, this one is available on top of the standard deduction.
It applies to tax years 2025 through 2028 only.
Sources & verification. Schedule 1-A (Form 1040) 2025, Part IV (irs.gov, form f1040s1a) — every line reference is to that form. IRS newsroom page “One Big Beautiful Bill provisions: working families tax cuts for individuals and workers” and IR-2025-129, for the $10,000 cap, the after-2024 origination rule, US final assembly and the lease exclusion.
Figures checked 4 November 2026 against the IRS sources above. This calculator is an estimator for planning, not tax advice.
Spotted a figure that looks wrong? Report it — accuracy is the whole point of these pages.
Related: the Auto Loan Calculator works out the payment itself; the other four new deductions are in the hub.
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For tax years 2025–2028, interest on a loan for a new vehicle — original use with you, final assembly in the United States, loan originated after 2024 — is deductible up to $10,000 a year on Schedule 1-A. This calculator checks the four gates (loan not lease, loan date, new vehicle, US assembly), then applies the cap and the phase-out, which is the sharpest of the four: $200 per $1,000 or part of $1,000 over the threshold.
A single filer who paid $4,200 of interest on a qualifying 2025 loan, with a MAGI of $68,000, deducts the full $4,200. At a MAGI of $100,001 the same interest already loses $200 — the first part-step counts in full.
The calculation follows Schedule 1-A (2025) Part IV exactly: the smaller of qualified interest or $10,000, reduced by $200 for each $1,000 or part of $1,000 of MAGI over $100,000 ($200,000 joint) — line 28 rounds up, unlike the other deductions.
No. Lease payments are never deductible under this rule; only interest on a loan counts, and the loan must be the purchase loan.
No — final assembly is what counts, not the brand. Conversely, a foreign brand assembled in the US does qualify.
Yes. The vehicle identification number is entered in Part IV of Schedule 1-A, and your lender must furnish an interest statement for larger loans.
No. Schedule 1-A deductions work with the standard deduction.
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