Overview of the new deduction
- Effective 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use that meets other eligibility criteria. Lease payments do not qualify.
- Maximum annual deduction is $10,000.
- Phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
What counts as qualified interest
Interest must be paid on a loan that:
- Originated after December 31, 2024
- Was used to purchase a vehicle originally used by the taxpayer
- Was secured by a lien on the vehicle
- Was for a personal-use (nonbusiness) vehicle
If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.
What counts as a qualified vehicle
A qualified vehicle is a car, minivan, van, SUV, pickup truck or motorcycle that:
- Has a gross vehicle weight rating of less than 14,000 pounds
- Underwent final assembly in the United States.
To verify final assembly, check one of these:
- The vehicle label at the dealership
- The vehicle identification number (VIN)
- The National Highway Traffic Safety Administration, NHTSA VIN Decoder (verify vehicle assembly location)
Who qualifies
- Available to both itemizing and non-itemizing taxpayers.
- You must include the VIN on your return for any year you claim the deduction.
Reporting requirements
- Lenders or other recipients of qualified interest must file information returns with the IRS and provide statements to taxpayers showing the total amount of interest received during the taxable year.
