Is car loan interest tax deductible in 2026?

Yes, for tax years 2025 through 2028, under a new provision of the One Big Beautiful Bill Act. Eligible taxpayers can deduct up to $10,000 of interest on a qualifying car loan, claimed on IRS Schedule 1-A. It is available whether you take the standard deduction or itemize. The deduction sunsets after 2028 unless Congress extends it.

Which cars qualify for the car loan interest deduction?

The vehicle must be new — used vehicles do not qualify — and must have final assembly in the United States, which you can confirm by the VIN or window sticker. The loan must be secured by the vehicle and must have originated after December 31, 2024. Leases and refinanced pre-2025 loans do not qualify.

How does the income phase-out work?

The $10,000 cap is reduced by $200 for every $1,000 of modified adjusted gross income above $100,000 for single filers, or $200,000 for married filing jointly. The deduction reaches zero $50,000 above the threshold — so $150,000 MAGI for single filers and $250,000 for joint filers. Married filing separately is generally disqualified.

How much will the car loan interest deduction actually save me?

Your saving is the deductible amount times your marginal federal tax rate, not the deduction itself. For example, a $4,000 deductible amount at a 22% marginal rate saves $880 in federal tax. The calculator computes this directly so you see the real dollar benefit, not just the deduction size.

How do I claim the car loan interest deduction?

You claim it on IRS Schedule 1-A, attached to your Form 1040. Your lender will send a Form 1098 showing the interest you paid if it was $600 or more. You also report the vehicle identification number each year you claim it. The IRS regulations were still proposed as of early 2026 — confirm current rules with a tax professional.

New

Car Loan Interest Deduction Calculator 2026 — Your OBBBA Schedule 1-A Tax Savings

The One Big Beautiful Bill Act created a new federal deduction for car loan interest. Estimate your deductible amount after the income phase-out, and see what it actually saves you in tax dollars.

Your Estimated Deductible Amount

$3,200

Inputs

Car Loan Interest Paid This Year

From Form 1098 — interest only, not principal. Lenders report if $600+

$0$30,000

Your Modified Adjusted Gross Income (MAGI)

Close to your AGI for most filers — the phase-out is based on this

$0$400,000

Filing Status (sets the phase-out threshold)

Your Marginal Federal Tax Rate (%)

Your top federal bracket — 12, 22, 24, 32, 35, or 37 for most filers

0%37%

Your Estimated Deductible Amount

$3,200

Interest Eligible Before Phase-Out

$3,200

Reduction From the Income Phase-Out

MAGI at Which the Deduction Reaches Zero

$150,000

Share of Your Interest the Deduction Offsets

21.99%

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Coach Insight

For decades, interest on a personal car loan was never deductible. The OBBBA changed that for tax years 2025 through 2028: eligible buyers can deduct up to $10,000 of car loan interest a year, and it is an above-the-line deduction — you get it whether or not you itemize. But the rules are narrow. The vehicle must be new, have final assembly in the United States, and be bought with a loan that originated after December 31, 2024. The deduction phases out by $200 for every $1,000 of income above $100,000 (single) or $200,000 (married filing jointly), disappearing entirely $50,000 above that. Many buyers assume they get the full $10,000 and are surprised — this calculator shows your real number.