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Frequently asked questions
Is car loan interest tax-deductible in 2025?
Yes, for many people. A new federal deduction (2025–2028) lets you deduct up to $10,000/year of interest on a new, U.S.-assembled vehicle loan taken out after Dec 31, 2024, subject to income limits. IRS
Is it a credit or a deduction?
A deduction — it lowers your taxable income, so it saves you your marginal tax rate (e.g. 22%), not the full amount. It is not a dollar-for-dollar credit. IRS
Do I have to itemize?
No. It works on top of the standard deduction. IRS guidance
Do used cars qualify?
No. The vehicle must be new — original use begins with you. IRS
Do leases qualify?
No. Lease payments are excluded, and a lease-end buyout is a used vehicle. IRS
How do I know if my car was assembled in the U.S.?
Enter your VIN at the free NHTSA VIN Decoder and read the plant location, or check the “Final Assembly Point” on the window sticker. NHTSA
How much can I deduct?
Up to $10,000 of interest per year per return — but only the interest you actually pay, and less if your income is in the phase-out range. Most people deduct a few thousand or less in year one. CNBC
What’s the income limit?
It phases out from $100,000 to $150,000 MAGI (single) and $200,000 to $250,000 (married filing jointly), reduced by $200 per $1,000 over the threshold. IRSThomson Reuters
Can I claim it if I refinance?
Yes, if it’s the same vehicle, a first lien, and you don’t take cash out above the old balance. Thomson Reuters
Can I deduct interest on a loan from 2024?
No. The loan must be originated after December 31, 2024. IRS guidance
Is the $10,000 cap per car or per year?
Per tax return, per year — combined across all qualifying loans, the same for single and joint filers. RSM US
Do motorcycles, SUVs, or EVs qualify?
Yes — cars, minivans, vans, SUVs, pickups and motorcycles under 14,000 lbs qualify, and EVs qualify if U.S.-assembled. IRS
What form do I use?
The new Schedule 1-A with your vehicle’s VIN, attached to Form 1040. Thomson Reuters
Can a co-signer claim it?
Generally no — you must own the vehicle, be on the loan, and pay the interest. Multi-owner splits aren’t finalized in the rules.
What years does it apply to?
Tax years 2025 through 2028; it sunsets after 2028 unless extended. IRS