Auto Loan Interest
Deduction Calculator
Calculate your tax savings under the One Big Beautiful Bill Act. Deduct up to $10,000 in auto loan interest for qualified new vehicles purchased 2025-2028.
1Enter Your Details
Max deductible: $10,000/year
Annual: $85,000
Estimated Rate: 22%
Based on 2025 federal tax brackets
✓Vehicle Eligibility Requirements
New Vehicle
Must be new (not used or pre-owned)
US Assembly
Final assembly in the United States
Personal Use
Vehicle must be for personal use only
Loan Date
Loan originated after Dec 31, 2024
Purchase Date
Vehicle purchased 2025-2028
Weight Limit
GVWR under 14,000 pounds
Understanding the 2025 Auto Loan Interest Deduction
The One Big Beautiful Bill Act (Public Law 119-21), signed into law on July 4, 2025, introduced a new above-the-line tax deduction for auto loan interest. This means you can claim this deduction even if you take the standard deduction—you don't need to itemize.
How Much Can You Deduct?
Taxpayers can deduct up to $10,000 per year in interest paid on qualifying auto loans. The deduction applies to loans originated after December 31, 2024, for vehicles purchased between January 1, 2025, and December 31, 2028.
Income Phase-Out Thresholds
The deduction begins to phase out for higher-income taxpayers:
- Single filers: Phase-out begins at $100,000 MAGI, eliminated at $150,000
- Married Filing Jointly: Phase-out begins at $200,000 MAGI, eliminated at $250,000
- Married Filing Separately: Phase-out begins at $100,000 MAGI, eliminated at $125,000
- Head of Household: Phase-out begins at $100,000 MAGI, eliminated at $150,000
Vehicle Qualification Requirements
Not all vehicles qualify for this deduction. To be eligible, the vehicle must meet these requirements:
- New vehicle only: Used and pre-owned vehicles do not qualify
- Final assembly in the United States: The vehicle must be assembled in the U.S.
- Personal use: Business-use vehicles are excluded from this deduction
- Weight limit: Gross Vehicle Weight Rating (GVWR) must be under 14,000 pounds
- Timing: Loan must be originated after December 31, 2024
How Tax Savings Are Calculated
This calculator determines your tax savings using the following formula:
Tax Savings = Allowed Deduction × Marginal Tax Rate
The "allowed deduction" is the lesser of your actual interest paid or $10,000, reduced by any income-based phase-out. Your marginal tax rate determines how much each dollar of deduction saves you in taxes.
Important Disclaimer
This calculator provides estimates for educational purposes only. Actual tax savings may vary based on your complete tax situation. Always consult with a qualified tax professional before making financial decisions. The information provided here reflects our understanding of the law as of December 2025 and may be subject to change based on IRS guidance.
Frequently Asked Questions
Can I deduct interest on a used car loan?
No. The 2025 auto loan interest deduction only applies to new vehicles. Used cars, certified pre-owned vehicles, and leased vehicles do not qualify for this deduction.
Is there a limit on how many vehicles can qualify?
There is no limit on the number of qualifying vehicles, but the total interest deduction is capped at $10,000 per year across all qualifying loans.
What if I use my car partially for business?
The vehicle must be for personal use only. If you use your vehicle for business purposes, the interest may be deductible under different provisions, but not under this specific 2025 auto loan interest deduction.
How do I know if my car was assembled in the US?
You can find this information on the vehicle's window sticker (Monroney label) or by checking the Vehicle Identification Number (VIN). The first character of the VIN indicates the country of manufacture—VINs beginning with 1, 4, or 5 typically indicate U.S. assembly.