Can I deduct my car loan interest on my 2025 taxes — and does my car qualify?

Yes, a new "No Tax on Car Loan Interest" deduction was created by the One Big Beautiful Bill Act for tax years 2025 through 2028. But there are strict vehicle eligibility rules that disqualify many cars.

What you can deduct:

• Interest paid on a qualifying vehicle loan
• Maximum deduction: $10,000 per year
• Phase-out: starts at MAGI over $100,000 (single) or $200,000 (married filing jointly)
• Available to both itemizers and non-itemizers

Vehicle requirements — all of these must be met:

• New vehicle only — the original use of the vehicle must start with you. Used cars do not qualify.
• Personal use — not for business or commercial use. If you use the car for business, the interest goes through vehicle business expense rules instead.
• Assembled in the United States — the vehicle must have undergone final assembly in the U.S. Check the sticker on the dealer's lot or use the VIN Decoder at the NHTSA website.
• Vehicle type: must be a car, minivan, van, SUV, pickup truck, or motorcycle with a gross vehicle weight rating under 14,000 lbs.
• Loan must be secured by a lien on the vehicle (standard auto loans qualify; personal loans used to buy a car do not).
• Loan originated after December 31, 2024 — loans taken out before 2025 do not qualify, even for interest paid in 2025.

Lease payments do NOT qualify — only loans.

How to claim:

Include the Vehicle Identification Number (VIN) of your car on your return. Use Schedule 1-A (new for 2025). Your lender is required to send you a statement showing the total interest paid.

If you refinanced: Interest on the refinanced amount is generally still eligible for the deduction.

Pro tip: Not all popular vehicles are assembled in the U.S. Many Japanese, German, and Korean brands (and even some U.S. brands) manufacture abroad. Check the NHTSA VIN decoder at nhtsa.gov/vin-decoder before assuming you qualify.