Car Loan Interest Deduction Calculator
Calculate your tax savings on auto loan interest for new, US-assembled vehicles under the One Big Beautiful Bill Act
We built this calculator from the One Big Beautiful Bill Act's text to help car buyers understand the new auto loan interest deduction. It applies only to new vehicles whose final assembly took place in the United States.
Max Interest Deduction
Final Assembly Required
Modified AGI Phase-out Start (single / joint)
Effective Years
Can I deduct car loan interest on my taxes in 2025?
Under the One Big Beautiful Bill Act (OBBB), taxpayers can deduct up to $10,000 of car loan interest per year on new vehicles manufactured in the United States for tax years 2025-2028. The vehicle must be new (not used), and you must be the original owner.
- Maximum car loan interest deduction is $10,000 per year
- Vehicle must be manufactured/assembled in the United States
- Only NEW vehicles qualify (certified pre-owned does NOT qualify)
- Phase-out begins at $100,000 of modified AGI (single) or $200,000 (married filing jointly)
Source:IRS FS-2025-03
What Changed in 2025One Big Beautiful Bill Act
| Feature | Before OBBB (2024) | After OBBB (2025) | |
|---|---|---|---|
| Car Loan Interest Deduction | No deduction existed | Up to $10,000/year | |
| Vehicle Requirement | N/A | US-assembled, new vehicles | |
| Vehicle Price Limit | N/A | None (IRC §163(h)(4)) | |
| Phase-Out (Single) | N/A | Starts at $100,000 of modified AGI | |
| Phase-Out (Married) | N/A | Starts at $200,000 of modified AGI |
Most buyers hear 'new $10,000 car loan deduction' and start shopping. Then they read the fine print: the car has to be new, US-assembled, and you actually have to verify the VIN on a federal database. Two of those three are easy. The third is where deductions die at audit.
Real-world scenario
A $48,000 US-assembled SUV, 7.2% APR, 6-year loan
A buyer finances a $48,000 SUV assembled in Tennessee at 7.2% over 72 months, with the first payment in January 2026. Year-one interest paid: about $3,240, all in 2026. That's a $3,240 below-the-line deduction. What it saves depends on the buyer's bracket: for a single filer with $80,000 of modified AGI, taxable income falls from $63,900 to $60,660 after the standard deduction, about $713 of federal income tax for 2026. (This deduction is fully phased out before a single filer taking the standard deduction reaches the 24% bracket.) State returns follow it only where the state has adopted it. Over the loan's first three years (2026-2028), total deduction is about $8,201. A loan taken out during 2025 has only its 2025 payments on the 2025 return.
The part most people miss
The same nameplate can be assembled in two different countries. A Toyota Camry built in Georgetown, KY qualifies. A Camry built in Japan does not — even though it's the same model year and trim. Always run the VIN through the NHTSA decoder at vpic.nhtsa.dot.gov before claiming, and screenshot the result. That screenshot is your audit defense.
Buying a new car? Deduct up to $10,000 in loan interest.
The OBBB Act created a new deduction for car loan interest on US-assembled vehicles. If you financed a new car after December 31, 2024, you may qualify for significant tax savings.
Your Auto Loan Details
Savings use the 2025 brackets and standard deduction. OBBB car loan interest deduction applies 2025-2028.
Only the payments made in 2025 count toward the 2025 deduction.
Schedule 1-A modified AGI = AGI plus any amounts excluded under IRC §911 (foreign earned income), §931, or §933. If none apply, your AGI is your MAGI.
Vehicle Eligibility Checklist
Verify Your Vehicle's US Assembly
Use the NHTSA VIN Decoder to confirm your vehicle was assembled in the United States.
Open NHTSA VIN DecoderYour Car Loan Tax Savings
Estimated 2025 federal tax savings
5 payments in 2025, from the payment schedule.
Savings = federal income tax before minus after the deduction, using the 2025 brackets and the $15,750 standard deduction (no 65+ or blind add-on).
This is an estimate for informational purposes.
Multi-Year Potential
This deduction is available 2025-2028. If your loan spans multiple years, you can claim the interest paid in each year (up to $10,000/year).
Popular US-Assembled Vehicles That May Qualify
These vehicles are commonly assembled in the United States. Always verify your specific vehicle's VIN.
Ford
F-150, Mustang Mach-E, Bronco, Explorer
Chevrolet
Silverado, Equinox EV, Blazer EV, Tahoe
Tesla
Model 3, Model Y, Cybertruck
Toyota
Camry, RAV4, Tundra, Highlander
Honda
Accord, CR-V, Civic, Pilot
GMC
Sierra, Hummer EV, Yukon
Frequently Asked Questions
Sources & References
Primary references used for this content
Your Federal Income Tax
For Individuals
View on irs.gov
VIN Decoder
Verify US assembly
View on vpic.nhtsa.dot.gov
✓2 primary sources; links re-checked on a weekly rotation by the source watcher
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Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.