Car Loan Tax Deduction
What Is This Deduction?
The federal Auto Loan Interest Deduction allows qualifying buyers to deduct up to $10,000 per year in interest paid on eligible auto loans. This benefit applies only to new vehicles assembled in the United States and is designed to support American manufacturing.
Key Benefits at a Glance
Annual Savings
Deduct up to $10,000 in auto loan interest each year from your taxable income.
Domestic Assembly Required
Your vehicle must be final-assembled in the United States to qualify for this deduction.
Limited-Time Opportunity
Available for tax years 2025 through 2028 on loans originated after December 31, 2024.
Eligibility Requirements
- Vehicle must be purchased new (not leased or used).
- Loan originated after December 31, 2024 and secured by a lien on the vehicle.
- Vehicle is for personal use only (no fleet or business purchases).
- VIN must be included on your tax return.
- Refinanced qualifying loans generally remain eligible.
- This is an above-the-line deduction — no need to itemize.
Vehicle Criteria
- Cars, SUVs, trucks, vans, and motorcycles qualify.
- GVWR must be under 14,000 lbs.
- Final assembly in the United States is mandatory.
- Used and leased vehicles do not qualify.
Final assembly in the U.S. is the key factor —
Nissan Altima, Murano Frontier, Pathfinder and most Rogues!
Check your VIN using the official NHTSA VIN Decoder and confirm with your tax advisor.
Income-Based Limits
| Filing Status | Income Range | Maximum Deduction |
|---|---|---|
| Single | = $100,000 | Up to $10,000 |
| Married Filing Jointly | = $200,000 | Up to $10,000 |
| Single | $100,001–$149,000 | Partial (phase-out) |
| Married Filing Jointly | $200,001–$249,000 | Partial (phase-out) |
| Above these ranges | > $149,000 / $249,000 | No deduction |
Phase-out reduces roughly $200 for every $1,000 over the threshold. Refer to IRS guidance for exact figures.
FAQs
1. Can I claim this deduction if I take the standard deduction?
Yes. This is an above-the-line deduction, so you can claim it without itemizing.
2. Does refinancing affect eligibility?
Generally, refinanced qualifying loans remain eligible, provided all other requirements are met.
3. How do I confirm my vehicle qualifies?
Use the NHTSA VIN Decoder to verify final assembly in the U.S. and consult your tax advisor.
4. Are leased vehicles eligible?
No. Only new, purchased vehicles qualify for this deduction.
5. When does this program end?
The deduction applies to tax years 2025 through 2028 for loans originated after December 31, 2024.
Disclaimer: This information is for educational purposes only and does not constitute tax, legal, or financial advice. Consult a qualified tax professional for guidance based on your individual situation.