Myths & common mistakes

1. “Used cars qualify.” No — new only.
2. “Leases qualify.” No — excluded.
3. “Any car, regardless of where it’s built.” No — U.S. final assembly required.
4. “It’s a tax credit.” No — it’s a deduction (saves your bracket %, not dollar-for-dollar).
5. “You must itemize.” No — it works with the standard deduction.
6. “The whole payment is deductible.” No — interest only, not principal.
7. “The $10,000 cap is per car.” No — it’s per return, per year.
8. “Business vehicles count here.” No — must be >50% personal (business interest is deducted elsewhere).
9. “Refinancing always qualifies.” Only same vehicle, first lien, no cash-out.
10. “There’s no income limit.” It phases out above $100k/$200k.
11. “A loan from a relative counts.” No — related-party loans are excluded.
12. “My pre-2025 loan counts.” No — must originate after Dec 31, 2024.
13. “RVs/campers qualify.” No.
14. “It’s permanent.” No — it sunsets after 2028.

Sources throughout this guide: IRSIRS guidanceThomson ReutersCALT.