01/12/2026
The IRS has introduced a new, temporary tax deduction for interest paid on qualifying new car loans for tax years 2025 through 2028. This new benefit allows eligible individuals to deduct up to $10,000 annually of interest, even if they take the standard deduction.
To be eligible for this deduction, the loan must be for a new vehicle bought between December 31, 2024, and January 1, 2029, with final assembly in the U.S.. The vehicle must be a car, minivan, van, SUV, pick-up truck, or motorcycle weighing under 14,000 pounds, and the loan must be from a qualified lender for personal use. The deduction is reduced for those with a modified adjusted gross income over $100,000 for single filers or $200,000 for those married filing jointly.
To claim the deduction, taxpayers will need documentation from their lender showing interest paid. Starting in 2026, lenders will provide Form 1098. The deduction is claimed on Schedule 1-A (Form 1040, line 13b), and the vehicle's VIN must be included on the tax return. For more details, consult the IRS guidance page on the "One, Big, Beautiful Bill" provisions.
One, Big, Beautiful Bill Act: Tax deductions for working ... - IRS
Jul 13, 2025 — “No Tax on Car Loan Interest” * New deduction: Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qu...
IRS (.gov)
Big Beautiful Bill No Tax on Car Loan Interest changes explained
Dec 10, 2025 — Key takeaways * “No Tax on Car Loan Interest” is a new deduction that's part of the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025
Treasury, IRS provide guidance on the new deduction for car loan interest under the One, Big, Beautiful Bill | Internal Revenue Service https://share.google/lwidnwPEXkpT6GgH8
