Car Loan Interest Deduction Calculator (2026)

A new federal deduction lets you subtract up to $10,000 a year of interest on a loan for a new, US-assembled car, for 2025 through 2028. Check the qualifying rules, enter your loan, and see how much interest you pay each year and how much tax it can save you.

Loan amount ($)Interest rate (APR %)Loan term (months)First payment monthFirst payment yearHousehold income per year ($)Filing status

Does your car qualify?New vehicle, not usedFinal assembly in the United StatesMainly for personal use, under 14,000 lbsLoan taken out after 2024, secured by the car (not a lease)

Total federal tax savings, 2025 to 2028

Monthly payment

Total interest over the loan

How the car loan interest deduction works

Normally, interest on a personal car loan is not deductible. For tax years 2025 through 2028, you can deduct up to $10,000 a year of interest on a qualifying loan, whether you itemize or take the standard deduction. It lowers your federal income tax only.

2026 rules at a glance

Maximum deduction$10,000 per year

Phase-out starts (single)$100,000 income

Phase-out starts (married filing jointly)$200,000 income

Phase-out speed$200 less per $1,000 over

Fully phased out$150,000 / $250,000

Years covered2025 to 2028

Does my car qualify?

New, not used. The car must be new and not titled to anyone before you.
Assembled in the US. Final assembly must happen in the United States. The vehicle information label or the VIN decoder from NHTSA shows the assembly plant.
Personal use. Cars, SUVs, vans, pickups and motorcycles under 14,000 lbs, used mainly for personal purposes.
The right kind of loan. Taken out after December 31, 2024, secured by a first lien on the car. Leases, loans from relatives and fleet purchases do not qualify.

Examples (loan starting January 2026)

$35,000 at 7% for 60 months, single, $70,000 income: 2026 interest $2,258saves about $497 in 2026

$45,000 at 6.5% for 72 months, single, $90,000 income: 2026 interest $2,738saves about $602 in 2026

$50,000 at 7.5% for 72 months, single, $110,000 income (partly phased out): 2026 interest $3,517saves about $334 in 2026

$60,000 at 6% for 60 months, married, $180,000 income: 2026 interest $3,311saves about $729 in 2026

Interest is highest in the first year of a loan and falls as you pay it down, so the savings shrink each year.

How this calculator works

It builds a month-by-month payment schedule for your loan and adds up the interest that falls in each calendar year. For each year from 2025 to 2028 it caps the interest at $10,000, reduces it by $200 for every $1,000 of income above the threshold, and compares your 2026-rule federal income tax with and without the deduction. Use the auto loan calculator to plan the payment itself.

FAQ

Can I deduct interest on a used car?

No. Only loans for new vehicles qualify under this rule.

How do I know if my car was assembled in the US?

Check the window sticker (Monroney label), which lists the final assembly point, or enter your VIN in the NHTSA VIN decoder.

Do I need to itemize?

No. The deduction is available whether you itemize or take the standard deduction.

Does a lease count?

No. Lease payments are not loan interest and do not qualify.

What if I refinance?

Interest on a refinanced loan can still qualify if the new loan is secured by the same qualifying car, generally up to the original balance.

Rules and rates last checked: October 2026. This is an estimate for general information only, not financial, tax or legal advice. Check IRS.gov or a tax professional before you file.

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