Car Loan Interest Deduction Calculator
New for 2025–2028: up to $10,000/year of car-loan interest is deductible — even if you take the standard deduction. Here's what your loan qualifies for after the income phase-out, and what it's actually worth at your bracket.
What it's worth
Total tax savings, 2025–2028
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Total deductible interest
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Your marginal rate
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Monthly payment
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Interest after 2028 (not deductible)
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| Tax year | Interest paid | Deductible | Tax savings |
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Does your vehicle qualify?
All of these must be true (per IRS guidance on the 2025 law): the vehicle is new — its original use starts with you (used vehicles don't qualify, and neither do leases); it's a car, minivan, van, SUV, pickup, or motorcycle under 14,000 lbs GVWR; its final assembly happened in the United States (check the vehicle information label on the window sticker, or look up the VIN); the loan was taken out after December 31, 2024, is secured by a lien on the vehicle, and the vehicle is for personal use. You'll report the VIN on your tax return, and your lender is required to send you a statement of the interest you paid.
How the phase-out works
The deduction shrinks by $200 for every $1,000 (or part of one) that your modified AGI exceeds $100,000 (single or head of household) or $200,000 (married filing jointly). That kills it entirely at $150k/$250k. Note the cliff-like texture: crossing even $1 into a new $1,000 chunk costs the full $200 — at the margins, a $500 401(k) contribution that drops your MAGI under the next chunk boundary can be worth an extra $200 of deduction.
Refinancing keeps the deduction
Per the IRS: interest on a refinanced amount of a qualifying loan generally remains eligible. So if rates drop, you can refinance the loan without losing the deduction on the balance you carried over — the rare case where the tax code doesn't punish shopping your rate.
Keep the number honest
A deduction is not a credit: $10,000 deductible at the 22% bracket is $2,200 in your pocket, not $10,000. On a typical $40k/7% loan the first-year interest is around $2,600 — real money, but a fraction of what "no tax on car loan interest" sounds like. And the provision expires after tax year 2028; interest you pay in 2029 and beyond is just interest again. Don't buy more car for the deduction.