Car Loan Interest Tax Deduction Calculator
Loan Details
The deduction only applies to tax years 2025–2028, regardless of your loan term.
Phase-out begins at $100,000 and fully eliminates the deduction at $150,000.
Eligibility Checklist
Estimated Tax Savings
Based on a $2,523 deduction at your 22% marginal rate.
Deduction Breakdown
Interest Paid by Loan Year
- Year 1$2,523
- Year 2$2,035
- Year 3$1,511
- Year 4$949
This is a new personal deduction available whether you itemize or not. Verify final assembly location using the NHTSA VIN decoder before filing.
Based on your results — what to do next:
Model the full loan payment
See your monthly payment and total interest cost across the full 60-month term, not just this tax year.
See your full 2026 take-home pay
A $2,523 deduction lowers your taxable income — recalculate your exact net paycheck with the new total.
Adjust your paycheck withholding
Worth $555 in savings — update your W-4 now instead of waiting for one lump refund next April.
The car loan interest tax deduction is a new personal deduction created by the One Big Beautiful Bill Act (OBBBA), letting taxpayers deduct up to $10,000 per year in interest paid on a loan for a new, U.S.-assembled vehicle. It applies to tax years 2025–2028, phases out above $100k MAGI ($200k joint), and does not require itemizing. This calculator computes your exact deductible amount and estimated tax savings.
How the Car Loan Interest Deduction Is Calculated
The deduction is the lesser of your annual loan interest or $10,000, then reduced by a MAGI-based phase-out.
| Variable | 2026 Rule |
|---|---|
| Annual deduction cap | $10,000 |
| Phase-out starts (Single) | $100,000 MAGI |
| Phase-out starts (Joint) | $200,000 MAGI |
| Fully phased out (Single / Joint) | $150,000 / $250,000 MAGI |
| Eligible tax years | 2025, 2026, 2027, 2028 |
Interest declines every year as your loan balance amortizes, so the calculator builds a full amortization schedule from your loan amount, APR, and term, then isolates the interest paid in the specific loan year you select.
⚠️ Expert Pro-Tip
Verify final assembly location before you sign, not after. "Made in America" branding on a sticker is not proof — the IRS points taxpayers to the NHTSA VIN decoder to confirm final assembly location. Two trims of the same model can be assembled in different plants. Check the VIN before financing if this deduction is part of your purchase decision, since a loan on a foreign-assembled vehicle earns $0 under this provision no matter how much interest you pay.