New Personal Car Loan Interest Deduction: Up to $10,000 Per Taxpayer

Starting in 2025, qualifying taxpayers may deduct up to $10,000 of personal-use car loan interest. This applies only to interest on eligible vehicles and only through 2028.

Vehicle requirements

To qualify, the vehicle must:
• Be purchased after 12/31/2024
• Be used for personal (not business) driving
• Have final assembly in the United States
• Have original use begin with you
• Be financed with a first-lien auto loan (not a lease)

Income limits

The deduction is reduced by $200 per $1,000 of MAGI above:
• $100,000 (single)
• $200,000 (joint filers)

Documentation needed

• Purchase contract
  • Loan documents
  • Annual interest statement (or monthly statements)
  • VIN must be reported on your tax return

Bottom line

If your vehicle meets the requirements, this deduction can reduce your taxable income significantly—especially for higher-interest loans.