If you financed a new car in 2025 or plan to buy one before 2028, you may be able to deduct thousands of dollars in loan interest — even if you take the standard deduction. The new car loan interest deduction, created under the One Big Beautiful Bill’s Working Families Tax Cuts, is one of the lesser-known changes for this tax season. Here’s who qualifies, how much you can deduct, and what doesn’t count.

What Is the New Car Loan Interest Deduction

For tax years 2025 through 2028, individuals can deduct interest paid on a loan used to buy a qualified vehicle for personal use. It’s part of the Working Families Tax Cuts under the One Big Beautiful Bill, and unlike many deductions, it’s available whether you itemize or take the standard deduction.

Do You Qualify

To claim the deduction, the vehicle and loan generally need to meet all of the following:

• The vehicle is new (used vehicles do not qualify) and assembled in the United States
• It’s purchased for personal use, not business
• The loan was incurred after December 31, 2024
• The vehicle is a car, minivan, van, SUV, pick-up truck, or motorcycle with a gross vehicle weight rating under 14,000 pounds
• Lease payments do not qualify — the deduction is for purchase loans only

How Much You Can Deduct

The maximum deduction is $10,000 per year. It phases out for higher earners:

• Begins phasing out above $100,000 modified adjusted gross income (MAGI) for single filers
• Begins phasing out above $200,000 MAGI for joint filers

What Doesn’t Qualify

A few common situations are excluded from the deduction:

• Leased vehicles
• Used vehicles, even if new to you
• Vehicles with a gross vehicle weight rating of 14,000 pounds or more
• Loans for business-use vehicles

How to Claim It

Lenders that receive $600 or more in car loan interest from an individual in a calendar year are required to report it, similar to mortgage interest reporting. Keep your lender’s interest statement on hand when you file, and check current IRS guidance for the exact form and line used to claim the deduction for your tax year.

FAQ

Does refinancing a car loan count?
Check current IRS guidance before assuming a refinanced loan qualifies the same way as an original purchase loan — the rules can depend on how and when the loan was originated.

What if I bought my car before 2025?
The deduction applies to loans incurred after December 31, 2024, so vehicles financed earlier generally don’t qualify.

This article is for general informational purposes and is not tax, legal, or financial advice. Deduction rules and thresholds can change with future IRS guidance. For guidance specific to your situation, consult IRS.gov or a licensed tax professional.