Car Loan Interest Is Deductible Again — If Your Vehicle Makes the Cut

For decades, the answer to "can I deduct my car loan interest?" was a flat no (unless the car was for business). That changed with the One Big Beautiful Bill Act — and if you drive a truck in Texas, there's a decent chance your vehicle qualifies.

Here's the catch-heavy version: you can deduct up to $10,000 a year in car loan interest, but only on a new, US-assembled, personal-use vehicle with a loan taken out after December 31, 2024. Miss any one of those and you get nothing.

Let's figure out if your vehicle makes the cut.

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TL;DR

• Deduct up to $10,000/year of interest on a qualifying vehicle loan, tax years 2025–2028.
• The vehicle must be new, for personal use, under 14,000 lbs, and — the big one — finally assembled in the United States.
• The loan must be originated after Dec 31, 2024 and secured by the vehicle.
• Phases out above $100,000 MAGI (single) / $200,000 (joint) — gone entirely at $150,000/$250,000.
• Works with the standard deduction. You'll need the VIN on your return, and lenders now send Form 1098-VLI showing your interest paid.
• Want your exact numbers? Run our free Car Loan Interest Deduction Calculator.

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The Five Tests Your Vehicle Must Pass

1. It's new. Original use starts with you. Used and certified pre-owned vehicles are out, full stop.

2. It's assembled in the US. This is where people get surprised, because brand nationality is irrelevant:

• Toyota Tundra — built in San Antonio. Qualifies.
• Ford F-150 — Dearborn, MI and Claycomo, MO. Qualifies.
• Chevy Silverado — depends on the plant; some are built in Mexico. Check the label.
• Several "import" SUVs (many Hondas, Toyotas, BMWs, Hyundais) are US-built and qualify; several "American" models aren't and don't.

The final assembly point is printed on the vehicle information label on the driver's side door jamb. Check before you sign, not at tax time.

3. It's for personal use. Commuting, family hauling, weekend trips. If you use it in your business, that's a different (and often better) deduction — see our business vehicle deduction guide.

4. The loan is post-2024 and secured by the vehicle. Loans from before 2025 don't qualify. Neither do leases, personal loans from family, or unsecured credit lines. A refinance of a qualifying loan keeps the deduction, up to the original balance.

5. Your income is under the phaseout. The deduction shrinks by $200 for every $1,000 of modified AGI above $100,000 (single) or $200,000 (joint). At $150,000/$250,000 it's fully gone.

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What It's Actually Worth

Let's run real numbers on a DFW favorite:

A Frisco family buys a new $65,000 US-built truck in 2026, financing $58,000 at 7.2% for 72 months.

• Year-one interest: roughly $4,000
• At a 22% marginal rate: about $880 in federal tax savings
• Over the first three years (2026–2028, while the deduction exists): roughly $2,300 total

Not life-changing, but it's real money for doing nothing except checking a box — and it stacks on top of your standard deduction.

One thing it shouldn't do: talk you into more truck than you need. An $880 tax break on $4,000 of interest still means you paid $4,000 of interest. The deduction softens borrowing costs; it doesn't make debt free.

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How to Claim It

1. Get your Form 1098-VLI. Starting with tax year 2026, lenders must send this form showing the interest you paid on a qualifying vehicle loan (similar to the 1098 you get for mortgage interest).
2. Have your VIN handy. The IRS requires the vehicle identification number on your return.
3. File Schedule 1-A with your Form 1040. The deduction lives there alongside the new tips, overtime, and senior deductions — all claimable with the standard deduction.

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Common Mistakes

1. Assuming the brand tells you the assembly location. Always check the door-jamb label or window sticker.
2. Claiming a lease. Lease payments include implicit financing costs, but none of it qualifies.
3. Claiming a used vehicle because it was US-built. New only.
4. Double-dipping with business use. If you deduct the vehicle through your business (mileage or actual expenses), you can't also claim personal car loan interest on the same use. Talk to your CPA about which treatment wins — for genuine business vehicles, the business deduction is usually worth far more.
5. Forgetting the phaseout when income jumps. A big bonus year or capital gain can quietly erase this deduction.

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The Bottom Line

If you bought (or are about to buy) a new US-assembled vehicle with a loan, this is one of the easiest deductions of the OBBBA era: check the label, keep the 1098-VLI, put the VIN on Schedule 1-A. If your income is near the phaseout or the vehicle does double duty in your business, the math gets more interesting — and that's where planning beats guessing.

Buying a vehicle this year and not sure whether personal or business treatment saves more? That's a 15-minute conversation. Let's run your numbers →

— Krystal Le, CPA

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LeCPA helps families and business owners across Plano, Frisco, McKinney, Richardson, and the greater DFW area keep more of what they earn.

Sources:

• Treasury/IRS: Guidance on the New Deduction for Car Loan Interest
• IRS: One Big Beautiful Bill Provisions — Individuals and Workers
• IRS Notice 2025-57: Transition Relief for Car Loan Interest Reporting