Federal Vehicle Loan Interest Deduction Overview
Current federal tax legislation allows qualified buyers to deduct up to $10,000 per year in interest paid on an eligible auto loan. This applies to new, personally owned vehicles that are assembled in the United States and financed during the applicable tax years.
How the Deduction Works
Taxpayers may deduct up to $10,000 annually for interest paid on a qualifying auto loan.
The deduction lowers taxable income, which may reduce the amount of federal taxes owed.
This provision applies to interest paid between 2025 and 2028 on loans issued after December 31, 2024.
Eligibility Requirements
To qualify for the auto loan interest deduction, all of the following conditions must be met:
• The vehicle must be purchased new; used vehicles and leases are not eligible.
• The loan must be secured by the vehicle and originate after December 31, 2024.
• The vehicle must be intended for personal use only, not business or commercial purposes.
• The vehicle identification number (VIN) must be included when filing your tax return.
• Interest on a refinanced loan may still qualify if the original loan met all requirements.
• This is an above-the-line deduction, meaning it can be claimed even if you do not itemize deductions.
Qualifying Vehicles
Eligible vehicles generally include:
• Passenger cars, SUVs, pickup trucks, vans, minivans, and motorcycles
• Vehicles with a gross vehicle weight rating (GVWR) under 14,000 pounds
• Vehicles that completed final assembly in the United States
Leased vehicles and used models do not qualify for this deduction.
Final assembly location can be confirmed using the vehicle’s VIN through official databases such as the NHTSA VIN decoder.
Income Limits and Phase-Out Rules
The amount you can deduct depends on your income and filing status:
• Single filers earning up to $100,000 may qualify for the full deduction
• Married couples filing jointly earning up to $200,000 may qualify for the full deduction
• Partial deductions are available for incomes above these thresholds, up to $149,000 (single) or $249,000 (joint)
• Taxpayers earning above the phase-out range are not eligible
The deduction amount is gradually reduced as income increases beyond the initial limits.
Additional Information
• All IRS requirements regarding loan structure and vehicle eligibility must be met.
• This information is provided for general educational purposes only and should not be considered tax or legal advice. Consult a qualified tax professional to determine eligibility based on your individual situation.