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Car Loan Interest Deduction Phase-Out: Calculator and Tables

The deduction shrinks by $200 for every $1,000, or part of $1,000, of MAGI over $100,000 ($200,000 joint). See where your income lands for 2026.

Tax year

Your adjusted gross income (Form 1040, line 11a for 2025), plus any income from Puerto Rico, American Samoa or abroad you excluded. For most people MAGI is simply AGI.

From 2026: Form 1098-VLI, box 1. For 2025: your lender’s year-end statement. Add up the interest if you have two qualifying loans.

The vehicle

The vehicle information label (window sticker) names the final assembly point; NHTSA’s VIN decoder shows the plant of manufacture. The vehicle also has to be treated as a motor vehicle under title II of the Clean Air Act.

The loan

Only a refinance of a qualifying loan counts, so the loan you refinanced must have been taken out after December 31, 2024.

Tax saving estimate
2026 deduction after the phase-out
$200
About $44 less federal income tax

Interest counted
$4,000
Phase-out
−$3,800
Estimated federal tax saving
$44
Tax bracket
22%, 2026 single
Taxable income (estimate)
$102,400 → $102,200

The saving assumes the standard deduction and no credits. If you itemize, are 65 or older, or take other deductions, choose "I know my taxable income" below.

Not tax advice. Check your own case with a qualified tax professional.

An estimate under the federal rules as of October 2026. Nothing you enter leaves your device.

What doesn't count

  • $3,800 taken off by the phase-out: $200 for each $1,000, or part of $1,000, of MAGI over $100,000.
  • Your loan payments themselves: only the interest part counts, never the principal.
  • Interest on amounts that aren’t customarily financed with the vehicle: negative equity from a trade-in, liability insurance, a trailer. Sales tax, fees, service plans and extended warranties financed with the car do count.
  • Leases, used vehicles, vehicles assembled outside the US, loans from before 2025, and loans for fleet sales or commercial vehicles not used personally.
  • Vehicles that aren’t treated as motor vehicles under title II of the Clean Air Act, or that run only on rails.
  • A refinance of a loan from before 2025, and on any refinance, interest on cash-out above the balance that was refinanced.
  • The deduction lowers federal income tax only. It doesn’t lower your AGI, and your state may not follow it.

Phase-out by income

The $4,000 you can count drops by $200 for each $1,000 (or part of $1,000) of MAGI over $100,000; the deduction reaches $0 at anything above $119,000.

MAGIDeduction
$100,000$4,000
$105,000$3,000
$110,000$2,000
$115,000$1,000
$118,500$200
$119,001$0

How to report it

For 2025 returns

  • Claim it on Schedule 1-A (Form 1040), Part IV. Line 22 needs the vehicle identification number (VIN) of each vehicle: no VIN, no deduction. Interest you already deducted on Schedule C, E or F goes in column (ii), the rest in column (iii).
  • Line 24 caps it at $10,000; lines 25–29 work out the phase-out, rounding the excess up to the next $1,000. The schedule’s total goes on Form 1040, line 13b, whether you itemize or not.
  • The IRS gave lenders transition relief for 2025, so the interest may come on your lender’s own statement rather than a standard form.
  • Married filing separately can claim it too, with the same $100,000 threshold as single filers. There is no Social Security number rule for this deduction, but the VIN is required.

For 2026 returns

  • Lenders that received $600 or more of interest send Form 1098-VLI: box 1 is the interest, boxes 2a–2d the vehicle’s year, make, model and VIN, box 3a the date the loan started. Not every dollar in box 1 is necessarily deductible: check the rules above.
  • Claim it on Schedule 1-A (Form 1040), the car loan interest part, with the VIN, every year you claim it.
  • The deduction runs through the 2028 tax year, for loans taken out after December 31, 2024.

How the phase-out works

The calculator opens with $4,000 of qualifying interest and $118,500 of MAGI on a single return. That is $18,500 over the $100,000 threshold. Schedule 1-A divides it by $1,000 and rounds up: 18.5 becomes 19. Nineteen times $200 is $3,800, which leaves a $200 deduction. At $118,000 exactly it would be 18 steps and $400.

Because the steps are rounded up and worth $200 each, this phase-out is steeper than the tips and overtime ones ($100 per full $1,000, rounded down). A small interest amount disappears quickly: $2,000 of interest is gone above $109,000 of MAGI on a single return.

The tables

The tables below show what is left of a $2,000, a $5,000 and a full $10,000 deduction at each income level, worked out with the same rule as the calculator, for single (and head of household, qualifying surviving spouse, married filing separately) and for joint returns. A dollar above a row’s MAGI moves you into the next $200 step.

What moves your MAGI

MAGI here is adjusted gross income plus a few excluded kinds of foreign and territory income. Anything that raises AGI raises it: wages, business profit, capital gains, IRA withdrawals, a Roth conversion, the taxable part of Social Security. Anything that lowers AGI lowers it, such as pre-tax retirement contributions through your employer or deductible IRA and HSA contributions. The other new deductions on Schedule 1-A (tips, overtime, seniors) don’t lower AGI, so they don’t change this phase-out.

The phase-out is the last step: the vehicle and loan still have to pass every check above, the interest is capped at $10,000 first, and only then is the reduction taken off.

Single, head of household, qualifying surviving spouse, married filing separately: deduction left by MAGI

MAGI$2,000 of interest$5,000 of interest$10,000 of interest
$100,000$2,000$5,000$10,000
$100,001$1,800$4,800$9,800
$105,000$1,000$4,000$9,000
$109,000$200$3,200$8,200
$110,000$0$3,000$8,000
$115,000$0$2,000$7,000
$120,000$0$1,000$6,000
$125,000$0$0$5,000
$130,000$0$0$4,000
$140,000$0$0$2,000
$149,000$0$0$200
$149,001$0$0$0

Married filing jointly: deduction left by MAGI

MAGI$2,000 of interest$5,000 of interest$10,000 of interest
$200,000$2,000$5,000$10,000
$200,001$1,800$4,800$9,800
$205,000$1,000$4,000$9,000
$209,000$200$3,200$8,200
$210,000$0$3,000$8,000
$215,000$0$2,000$7,000
$220,000$0$1,000$6,000
$225,000$0$0$5,000
$230,000$0$0$4,000
$240,000$0$0$2,000
$249,000$0$0$200
$249,001$0$0$0

Computed with the calculator’s rule: $10,000 cap, then $200 off for each $1,000 or part of $1,000 of MAGI over the threshold (Schedule 1-A, lines 24–30).

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