# Car loan interest deduction calculator

Work out your federal deduction on new-car loan interest for 2025–2028, and whether your vehicle actually qualifies.

The 2025 tax law lets buyers of a new, U.S.-assembled car, minivan, van, SUV, pickup truck or motorcycle deduct up to $10,000 of loan interest a year from federal income tax through 2028, whether or not they itemize. The deduction shrinks by $200 for every $1,000 (or part of $1,000) your MAGI is over $100,000 ($200,000 married filing jointly), reaching $0 above $149,000 (single) or $249,000 (joint). Unlike overtime and tips, married filing separately can still claim it.

## How this calculator works

Two checks decide the deduction.

**Does the vehicle qualify?** Every one of these has to be true: you're the original user (not
buying used), it's a car/minivan/van/SUV/pickup truck/motorcycle, under 14,000 lbs gross vehicle
weight rating, and final assembly happened in the United States. Miss any one of these and the
deduction is $0, regardless of how much interest you paid.

**The phase-out.** The $10,000 cap drops $200 for every $1,000 of MAGI over $100,000 (single) or
$200,000 (joint) — but the statute rounds this UP to the next $1,000, not down. Your deduction is the
smaller of that phased cap and the interest you actually paid.

## A worked example

Single filer, qualifying vehicle, no other adjustments.

| MAGI | Interest paid | Deduction | Estimated tax saved |
|---|---|---|---|
| $80,000 | $3,000 | $3,000 | $660 |
| $140,000 | $5,000 | $2,000 (cap has shrunk to $2,000 at this MAGI) | $480 |
| $150,000 | $2,000 | $0 (fully phased out) | $0 |

## Where the deduction disappears entirely

| Filing status | Cap | Fully phased out above |
|---|---|---|
| Single / head of household | $10,000 | $149,000 MAGI |
| Married filing jointly | $10,000 | $249,000 MAGI |
| Married filing separately | $10,000 | $149,000 MAGI (same as single) |

This is the one deduction in this group where married filing separately isn't barred outright — it
just doesn't get the higher joint threshold.

## The rounding direction is the opposite of overtime and tips

The overtime and tips deductions floor their phase-out to the nearest $1,000 — $999 over the
threshold costs nothing extra. This deduction ceilings instead: $1 over the threshold already costs
a full $200 step. It's the easiest detail to get backwards when estimating this deduction by hand.

## How to use it

1. Choose your filing status — this is one of the few new 2025 deductions where married filing separately isn't barred.
2. Enter your expected MAGI for the year, before this deduction.
3. Confirm the vehicle meets every requirement at once — new, the right type, under 14,000 lbs, and finally assembled in the US.
4. Enter the interest actually paid on the loan this year, not the loan balance or the monthly payment.

## Questions

### What vehicles actually qualify?

A car, minivan, van, sport utility vehicle, pickup truck, or motorcycle — under 14,000 lbs gross vehicle weight rating, whose "original use" begins with you (so a used or previously-titled vehicle doesn't count), and whose final assembly happened in the United States. ATVs and RVs are sometimes mentioned in secondary summaries of this deduction, but they don't appear in the statute's list of qualifying vehicle types.

### How do I check where a vehicle was assembled?

The window sticker on a new vehicle at a dealership lists the final assembly location. IRS guidance also says you can look up the plant of manufacture through NHTSA's VIN decoder once you have the vehicle's VIN.

### Do I need to itemize to claim this?

No — IRS guidance confirms this deduction is available whether you take the standard deduction or itemize, the same as the overtime and tips deductions. It's claimed on Schedule 1-A, not Schedule A.

### How does the phase-out work?

$200 for every $1,000 of MAGI over $100,000 ($200,000 joint) — but rounding UP to the next $1,000, not down. Even $1 over the threshold costs a full $200 of deduction, the opposite of how the overtime and tips phase-outs round down.

### Can married filing separately claim this?

Yes — unlike the overtime, tips, and senior bonus deductions, this one has no filing-status bar. A separate filer just uses the $100,000 threshold, the same as a single filer.