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Car Loan Interest Deduction Calculator (2025)

New for 2025: deduct up to $10,000/yr of car loan interest — no itemizing. This tool checks if your vehicle qualifies, amortizes your loan, and applies the income phase-out.

Updated for tax year 2025 · OBBBA · loans originated after Dec 31, 2024

Estimated deductible interest
$0
Monthly payment$0
Interest paid in selected year$0
After $10,000 annual cap$0
Phase-out reduction$0
Deductible interest$0
Total interest over full loan$0

If any eligibility box is unchecked, the deduction generally does not apply. Final-assembly location is the most-missed rule — verify it on the vehicle's window sticker or VIN decoder before relying on this. Educational estimate, not tax advice.

Worked example

A $38,000 loan at 7.5% APR over 60 months has a monthly payment of about $761. First-year interest is roughly $2,630 — well under the $10,000 cap — so if the vehicle qualifies and income is below the phase-out, the full ~$2,630 is deductible in year 1. Interest (and the deduction) shrinks each year as the balance falls.

How the calculation works

  1. Amortization: standard fixed payment = P·r / (1 − (1+r)⁻ⁿ), where r is the monthly rate. We sum the interest portion of each payment within the selected loan year.
  2. Cap: deductible interest = min(year's interest, $10,000).
  3. Phase-out: begins at $100,000 (single) / $200,000 (joint) MAGI; reduced $100 per $1,000 over.
  4. Eligibility: new, personal-use, US-final-assembly vehicle on a post-2024 loan. All three must hold.

FAQ

Does a used car qualify?
No. Only new vehicles for personal use with US final assembly on loans originated after Dec 31, 2024.
How do I check final assembly?
The window sticker (Monroney label) lists final assembly point; or decode the VIN. A US assembly plant is required.
Is the whole payment deductible?
No — only the interest portion, not principal. The deductible amount falls each year.

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