06/02/2026
The Big Beautiful Bill rolled out a few new deductions, one of those is the deduction on car loan interest. For the 2026 tax year, you can deduct up to $10,000 of interest paid on a qualifying car loan. But what qualifies the loan? Well a few things must meet the criteria:
š The Loan must originate after 12/31/24 and be secured by a first lien on the vehicle. Auto leases do not qualify.
š The Vehicle must have undergone its final assembly in the United States. To check the vehicles eligibility for this, the IRS encourages you to use the NHTSA Vin Decoder.
š The Vehicle must be new (not used), be under 14,000 pounds, and be for personal use (not business use).
If your new vehicle meets all the requirements, you will be able to take the total amount of interest you pay on that loan in 2026 (up to $10,000), as a deduction on your 2026 tax return. But keep in mind, like most credits and deductions, this deduction has a phaseout limit. For single filers, the deduction begins to phase out when your Modified Adjusted Gross Income exceeds $100,000 and it completely disappears at $150,000. For Married Joint Filers, the deduction begins to phase out when your Modified Adjusted Gross Income exceeds $200,000 and it disappears completely at $250,000.
So when tax time comes around next year, if you purchased and financed a qualifying vehicle, be sure to have the following information handy for us: VIN Number, Loan Origination Date, Outstanding Balance as of 12/31/26, and Total Interest paid in 2026.
