Qualified Car Loan Interest Deduction
This is a temporary federal deduction for qualifying interest paid on certain personal-use vehicle loans. It does not make the vehicle loan or its interest automatically tax-free.
The requirements are specific. A loan that originated before 2025, a used vehicle, or a lease will not qualify — even if you are paying interest.
Key details
- Maximum deduction
- $10,000 of qualified interest per year.
- When the loan started
- The loan generally must have originated after December 31, 2024.
- New vehicles only
- The vehicle's original use must begin with the taxpayer. Used vehicles and leased vehicles do not qualify.
- Where it was assembled
- The vehicle must meet the U.S. final-assembly requirement.
- How the loan is secured
- The loan must be secured by a lien on the qualifying vehicle.
- You'll need the VIN
- The taxpayer will need the vehicle's VIN.
- Income phase-out
- The deduction begins phasing out above $100,000 MAGI, or $200,000 for married filing jointly.
- Other rules apply
- Other vehicle, loan and reporting requirements apply.
What to save or bring to your appointment
- Lender statement showing the interest paid for the year
- The vehicle's VIN
- Purchase information and documentation for the vehicle
- Documentation establishing that the vehicle and loan meet the requirements
Download the document checklist (PDF) →
Official IRS information
This page is general educational information and is not tax advice for your particular situation. These rules carry additional eligibility and reporting requirements. See the official IRS information linked above, or contact Borinken Tax to talk through your circumstances.
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