New for 2026: deduct up to $10,000 of interest on a loan for a new, US-assembled vehicle. Estimate your deductible interest and tax savings. ✓ 2026 IRS figures
2026 deduction • Tax savings
For loans taken 2025–2028 on a new, US-assembled vehicle for personal use, the One Big Beautiful Bill lets you deduct up to $10,000 of loan interest per year — even if you take the standard deduction. It phases out above $100,000 modified AGI ($200,000 joint), reduced by $200 per $1,000 over.
Interest is highest in the early years of a loan, so this deduction is most valuable up front. Your savings equal the deductible interest times your tax bracket. Used cars, leases and business vehicles don't qualify. This is an estimate, not tax advice.
Recent US legislation created a deduction for interest paid on qualifying vehicle loans, reversing a long-standing rule under which personal car loan interest was entirely non-deductible. Eligibility typically depends on the vehicle meeting origin requirements and the loan being secured by the vehicle, with income phase-outs limiting the benefit for higher earners. The value is modest and front-loaded, because interest is largest in the early years of an amortizing loan and falls steadily — so the deduction is worth most in year one and declines every year after.
Deductible interest = interest paid in the tax year on a qualifying loanTax saved = Deductible interest × marginal rateInterest in year 1 ≈ largest; declines each year as the balance amortizesPhase-out reduces the deduction above income thresholdswhere:
Assumptions: Provisions, caps and eligibility are set by statute and subject to change; confirm current rules before relying on a projection. Business use of a vehicle is deducted separately and under different rules.
Compute the first-year deduction and show how quickly it decays.
Result$467 saved in year one — about $1,364 across the whole loan
The decay is steep because amortization front-loads interest: more than half the total benefit arrives in the first two years. It is a genuine saving but should not change which car you buy — $1,364 across five years is small against the depreciation on the same vehicle.