The New $10,000 Auto Loan Interest Deduction
For tax years 2025-2028, the OBBBA lets you deduct car loan interest. See if you qualify and how much you could save on a new, U.S.-assembled vehicle.
Calculate My DeductionDeduction & Savings Calculator
Use the sliders and inputs to estimate your annual deduction. The tool automatically applies the income phase-out rules to give you a personalized result.
Your Estimated Results
Max Allowable Deduction
$0
Annual Tax Savings
$0
Adjust the inputs to see your potential savings.
How The Deduction Works
This is a temporary tax break for 2025-2028. To qualify, you, your vehicle, and your loan must meet specific criteria set by the new law.
You: The Taxpayer
Your Modified Adjusted Gross Income (MAGI) must be below a certain threshold. The full deduction is available for those with MAGI at or below **$100k (Single)** or **$200k (Joint)**.
Your Vehicle
The vehicle must be **new** and have its **final assembly in the United States**. It applies to cars, SUVs, trucks, and even motorcycles under 14,000 lbs. Leased vehicles do not qualify.
Your Deduction
You can deduct up to **$10,000 of interest per year**. It's an "above-the-line" deduction, so you can take it even if you don't itemize.
Understanding the Income Phase-Out
If your income is above the main thresholds, your deduction is reduced. This chart visualizes how the benefit shrinks as income rises. Your personalized deduction from the calculator is shown in orange.
Special Rule for Small Business Owners
This deduction is for personal use, but if you use a vehicle for both business and personal trips, you may be able to claim two separate deductions for the same loan.
The Bifurcation Strategy for Mixed-Use Vehicles
You must split your total loan interest based on your mileage log. The business portion is deducted on Schedule C, while the personal portion can be claimed under this new OBBBA deduction.
Total Annual Interest Paid: $4,000
Total Mileage: 80% Business, 20% Personal
Business Portion
$3,000
(75% of total interest)
Deducted on Schedule C with other actual expenses (fuel, depreciation, etc.).
Personal Portion
$1,000
(25% of total interest)
Claimed as an above-the-line deduction under the new OBBBA rules.
This powerful strategy requires meticulous record-keeping but can significantly increase your total tax savings.
Official Sources & Useful Links
Laws can be complex. Refer to these primary sources for definitive information and further reading.
H.R. 1 (OBBBA) Full Text
Read the original legislation from Congress.gov.
Tax Foundation Analysis
Independent analysis on the economic impact and tax policy.
IRS Pub. 463 (Business Use)
The official IRS guide for deducting business-related car expenses.
Congressional Budget Office
Non-partisan analysis of the bill's fiscal impact.
Kiplinger News Report
Journalistic coverage explaining the deduction to consumers.
U.S. Tax Saving Tips Podcast
Listen to more tax-saving strategies in audio format (user-provided link).
