How to use the car loan interest deduction calculator
- Pick the tax year and your filing status, and enter your modified adjusted gross income (MAGI): for most people the adjusted gross income on 2025 Form 1040, line 11a.
- Enter the interest you paid on the loan that year. From 2026 your lender reports it on Form 1098-VLI, box 1; for 2025, use the lender’s year-end statement. If part of it is already deducted as a business expense, enter that part too.
- Answer the vehicle and loan questions. Each one is a rule in the law. Any “no” rules the deduction out, and the calculator says which rule it was.
- Read the deduction and the estimated tax saving, the phase-out table and how to report it, including the VIN you must put on the return.
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The rules, one by one
Pub. L. 119-21 (July 4, 2025) took “qualified passenger vehicle loan interest” out of nondeductible personal interest for tax years 2025 through 2028, in section 163(h)(4) of the tax code. Interest qualifies when:
- The vehicle is new to you. Its original use has to start with you, so used vehicles don’t qualify, even nearly new ones.
- It is a car, minivan, van, SUV, pickup truck or motorcycle made mainly for public roads, with a gross vehicle weight rating under 14,000 pounds.
- Its final assembly happened in the United States. The vehicle information label on new vehicles names the final assembly point, and the IRS lets you rely on it or on the plant of manufacture from the VIN.
- The loan was taken out after December 31, 2024, to buy the vehicle, is secured by a first lien on it, and isn’t from a related person. A refinance of such a loan counts up to the balance it paid off. Leases never count.
- You bought it for personal use, meaning you expected personal use more than half the time. Driving for a rideshare app 15% of the time still counts as personal use in the IRS’s example.
Cap and phase-out
You can deduct up to $10,000 of that interest a year, per return. Above $100,000 of MAGI ($200,000 on a joint return) the amount drops by $200 for each $1,000 or part of $1,000, so it shrinks faster than the tips and overtime deductions: even $1 over the threshold costs $200, and a full $10,000 is gone above $149,000 ($249,000 joint). The phase-out table shows where your income sits.
Married filing separately can claim it, with the same $100,000 threshold as single filers, and there is no Social Security number rule, but the VIN has to be on your return for every year you claim it. It works with the standard deduction or itemizing, doesn’t lower AGI, and covers only federal income tax.
Reading the estimated saving
The saving is figured with the federal brackets for the year: your taxable income is MAGI minus the standard deduction, unless you enter your taxable income or pick a bracket, and the tax is compared with and without the deduction. On a typical new-car loan the interest is highest in the first full year and falls as the balance goes down, so expect a smaller deduction each year.
Tips or overtime too? The no tax on tips and no tax on overtime calculators work out those deductions, and the interest calculator shows how interest builds on a balance.
Sources, checked October 18, 2026: Pub. L. 119-21, section 70203 (IRC section 163(h)(4)); IRS, 2025 Schedule 1-A (Form 1040) and its instructions in the 2025 Form 1040 instructions; IRS, Form 1098-VLI; IRS, FS-2025-03; NHTSA, VIN decoder. Brackets: Rev. Proc. 2024-40 and 2025-32.