Car Loan Interest Deduction Calculator (No Tax on Car Loans)
Estimate how much the new car loan interest deduction lowers your federal taxes. Enter your loan amount, APR, term, and first payment date, plus your income and filing status, and the calculator works out the interest you pay each year, how much of it is deductible, and the tax it saves.
The One Big Beautiful Bill Act lets you deduct up to $10,000 a year of interest on a loan for a new, U.S.-assembled vehicle bought after 2024, for tax years 2025 through 2028 — even if you take the standard deduction. The deduction shrinks once income passes $100,000, or $200,000 on a joint return.
Calculator
Estimated 2026 federal income tax saved
$481
from a $2,184 deduction · 22% top bracket
- Monthly payment
- $792
- Interest paid in 2026
- $2,184
- Income phase-out reduction
- $0
- Deductible interest, 2026
- $2,184
- Total deduction, 2025–2028
- $5,986
- Total tax saved, all years
- $1,317
Deduction by tax year
| Tax year | Interest paid | Deductible | Tax saved |
|---|---|---|---|
| 2025 | $0 | $0 | $0 |
| 2026 | $2,184 | $2,184 | $481 |
| 2027 | $2,166 | $2,166 | $477 |
| 2028 | $1,635 | $1,635 | $360 |
Interest paid after 2028 isn’t deductible unless Congress extends the deduction.
Estimate only — not tax advice. The loan must be taken out after December 31, 2024 to buy a new car, SUV, van, pickup, or motorcycle (under 14,000 lbs) whose final assembly was in the United States, for personal use, and be secured by the vehicle. Leases and used vehicles don’t qualify. You report the vehicle’s VIN on your return. Uses 2026 brackets and the standard deduction for every year, and treats your income as the same each year.
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Calculation Formulas
The loan is amortized month by month from your first payment date, and each payment’s interest is assigned to the calendar year it falls in. Early years carry the most interest.
Example:
$40,000 at 7% for 60 months, first payment in March 2026 → about $2,180 of interest in 2026 (10 payments).
The deduction is capped at $10,000 a year and phases out completely $50,000 above the threshold — at $150,000 of income single, $250,000 joint.
Example:
$3,000 of interest on $112,500 income (single) → 13 steps × $200 = $2,600 reduction → $400 deduction.
The deduction lowers taxable income, so the saving is roughly your top bracket rate times the deduction. It is claimed whether or not you itemize.
Key Figures
| Figure | Value | Description |
|---|---|---|
| Annual cap | $10,000 | Per return, single or joint. |
| Phase-out start | $100,000 / $200,000 | Modified AGI, single or head of household / joint. |
| Phase-out rate | $200 per $1,000 | Partial $1,000s count as a full step. |
| Loans covered | Taken out after 12/31/2024 | Secured by the vehicle; leases don’t qualify. |
| Years available | 2025–2028 | Temporary; expires after 2028 unless extended. |
Note: Results are estimates for planning purposes. Rates, fees, taxes, and insurance vary by lender and location — confirm exact figures with a licensed professional before making financial decisions.
Standards & Sources
Last verified: October 2026
- One Big Beautiful Bill Act (P.L. 119-21)
Allows a deduction of up to $10,000 a year of interest on a loan used to buy a qualified passenger vehicle, for tax years 2025 through 2028, available to taxpayers who take the standard deduction as well as itemizers.
- Qualified vehicle
A new car, minivan, van, SUV, pickup truck, or motorcycle under 14,000 pounds gross vehicle weight, bought for personal use, whose final assembly took place in the United States. Used vehicles and leases are excluded.
- Reporting
The deduction is claimed on Schedule 1-A of Form 1040, and the vehicle identification number (VIN) must be reported on the return.
- Modified AGI approximation
The phase-out uses modified adjusted gross income. This calculator treats your total income as MAGI, which matches for most wage earners without large above-the-line adjustments.
How to Use This Calculator
- Choose your filing status and enter your modified AGI — for most people, total income.
- Enter the amount you borrowed, the APR, and the loan term.
- Pick the month and year of your first payment so interest lands in the right tax years.
- Read your 2026 deduction and tax saved, then the year-by-year table through 2028.
Frequently Asked Questions
Is car loan interest tax deductible in 2026?
Yes, for tax years 2025 through 2028 — but only on a loan taken out after December 31, 2024 to buy a new vehicle whose final assembly was in the United States, for personal use. You can deduct up to $10,000 of interest a year, whether or not you itemize.
Which vehicles qualify for the car loan interest deduction?
New cars, minivans, vans, SUVs, pickup trucks, and motorcycles under 14,000 pounds, with final assembly in the U.S. Used vehicles, leased vehicles, and vehicles bought for business use don’t qualify. The final assembly location is listed on the vehicle’s window sticker and can be checked with the VIN.
What is the income limit for the car loan interest deduction?
The deduction is reduced by $200 for each $1,000 (or part of $1,000) of modified AGI above $100,000, or $200,000 for married couples filing jointly. It disappears entirely at $150,000 single or $250,000 joint.
How much will the car loan interest deduction save me?
Roughly your top tax bracket times the deductible interest. On a $40,000 loan at 7%, interest in the first full year is a bit over $2,500, which saves about $570 in the 22% bracket — less in later years as the balance falls.
How do I claim the car loan interest deduction?
On Schedule 1-A of Form 1040. You’ll need the interest paid during the year (shown on your lender’s year-end statement) and the vehicle identification number (VIN), which must be included on the return.
Guides to go with this calculator
No Tax on Car Loan Interest: Rules and Savings
Interest on a new car loan is deductible again — up to $10,000 a year through 2028. But the car has to be new and U.S.-assembled, and the income phase-out bites fast. Here’s what it’s really worth.
How Car Loan Interest Works & Why Longer Costs More
A lower monthly payment can hide a much bigger total cost. Here’s how car loan interest is set, why used-car rates run higher, and what a longer term really costs.
How a Car Lease Works: Money Factor & Residual
When you lease, you pay for the part of the car you use up, plus interest. Once you know the four numbers behind a lease payment, it’s much easier to spot a good deal — and negotiate one.
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