IRC §163(h)(4) · Vehicle loan interest
Car Loan Interest Deduction
Short answer
For tax years 2025 through 2028, eligible taxpayers may deduct up to $10,000 per return of interest on a qualifying loan used to buy a new passenger vehicle assembled in the United States.
The debt must have been incurred after December 31, 2024, must be secured by a first lien, and must finance a qualifying vehicle whose original use begins with the taxpayer.
Key facts
The figures and limits at a glance
Maximum deduction
$10,000
Annual limit per return, subject to income and eligibility restrictions.
Available years
2025–2028
For qualified interest paid or accrued in tax years beginning after 2024 and before 2029.
Phaseout begins
$100k / $200k
MAGI threshold for non-joint returns / married filing jointly.
Primary authority
Open the sources behind the answer
IRC §163 — Interest
IRC §163(h)(4) contains the qualified passenger vehicle loan interest rules.
IRS Topic 505 — Interest expense
The IRS summary of the $10,000 limit, loan requirements, original-use rule, and U.S. final-assembly rule.
IRS car-loan interest guidance
Treasury and IRS guidance on eligible vehicles, loans, and final assembly.
The loan and vehicle must qualify
The deduction is limited to interest on debt incurred after December 31, 2024, to purchase an eligible new passenger vehicle for personal use. The loan must be secured by a first lien on the vehicle.
- →The vehicle’s original use must begin with the taxpayer, so a used-vehicle purchase does not qualify.
- →Final assembly of the vehicle must occur in the United States.
- →The taxpayer must include the vehicle identification number on the return.
The deduction is available to non-itemizers
Eligible taxpayers can claim qualified passenger vehicle loan interest while taking the standard deduction. The annual amount is capped at $10,000 and is reduced above the statutory income thresholds.
- →The limit applies per return, not separately to every vehicle or borrower.
- →Related-party loans do not qualify.
- →The rule is for personal-use passenger vehicles; business interest follows separate tax rules.
Questions and answers
What practitioners ask next
Can I deduct interest on a used-car loan?
No. The vehicle’s original use must begin with the taxpayer, which generally limits the deduction to qualifying new vehicles.
Does the vehicle have to be made in the United States?
The statute requires final assembly in the United States. A taxpayer should verify the final-assembly location for the specific vehicle.
Do I need to itemize?
No. Eligible taxpayers can claim qualified passenger vehicle loan interest while using the standard deduction.
What is the income limit?
The deduction begins to phase out when modified adjusted gross income exceeds $100,000, or $200,000 for a joint return.
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