Car Loan Interest Deduction Calculator

If you bought an electric vehicle expecting a federal tax credit, the rules changed in 2025. The federal credits for buying a clean vehicle ended for vehicles acquired after September 30, 2025, so a page built on the old $7,500 credit would now be wrong. What replaced the credits is different: a deduction for interest paid on a qualifying vehicle loan, available for tax years 2025 through 2028, worth up to $10,000 per return per year. It applies to gas vehicles too, not only electric ones.

The estimator below figures your deduction under the current rules. It checks the eligibility conditions first, then applies the $10,000 annual cap and the income phaseout. It is an estimate only, not tax advice. The prefilled example shows joint filers with $150,000 of modified adjusted gross income and $8,400 of qualifying loan interest, which gives an $8,400 estimated deduction.

Quick Answer

What ended, and when

The One Big Beautiful Bill Act, Public Law 119-21, signed July 4, 2025, ended the federal clean-vehicle credits for vehicles acquired after September 30, 2025. The cutoff turns on acquisition, not delivery: a vehicle counts as acquired when a binding written contract was signed and a payment was made on or before September 30, 2025. Placed in service means the date the buyer takes possession.

The credits that ended

Where things stand now

As of October 2026, then, there is no federal credit for buying an electric vehicle and no federal charger credit for individuals. State incentives are a separate matter, they change often, and this page states no state figures.

The transition rule for pre-cutoff buyers

If you acquired a vehicle by the cutoff but took possession later, the old credit can still apply, and you claim it in the tax year of possession, on Form 8936 for the 30D and 25E credits. The pre-cutoff rules are worth knowing only for those buyers, since nobody else can use them now.

Old new-vehicle rules

For the old new-vehicle credit, the vehicle needed a battery capacity of at least 7 kWh, a gross vehicle weight rating under 14,000 pounds, and final assembly in North America. Price caps were $80,000 for vans, SUVs, and trucks and $55,000 for other vehicles. Income caps were $300,000 of modified adjusted gross income for joint filers, $225,000 for heads of household, and $150,000 for other filers. The $7,500 figure itself was two $3,750 parts, one for critical minerals and one for battery components.

Old used-vehicle rules

For the old used-vehicle credit, the sale had to be through a dealer, the sale price $25,000 or less, and the model year at least two years older than the purchase year. The credit was 30% of the price up to $4,000, with income caps of $150,000 joint, $112,500 head of household, and $75,000 for other filers, and no prior used-vehicle credit claim in the three years before purchase.

What replaced it: the car loan interest deduction

The replacement is called No Tax on Car Loan Interest, described in IRS fact sheet FS-2025-03. It is a deduction, not a credit: it reduces taxable income rather than cutting the tax bill dollar for dollar. It runs for tax years 2025 through 2028 under current law. These are the conditions, all of which must hold:

Conditions, all of which must hold

• The vehicle is new, meaning its original use starts with you. Used vehicles and leased vehicles do not qualify.
• The vehicle is for personal use, not business, commercial, or fleet use.
• The loan was originated after December 31, 2024, and is secured by a first lien on the vehicle. A loan from a related party does not qualify.
• The vehicle is a car, minivan, van, SUV, pickup truck, or motorcycle, with a gross vehicle weight rating under 14,000 pounds.
• Final assembly took place in the United States. The vehicle information label shows this, and the NHTSA VIN decoder can confirm it from the vehicle identification number.
• The vehicle identification number goes on the tax return.

The $10,000 cap and the phaseout

The deduction is up to $10,000 of qualifying interest per return per year, not per vehicle and not per person, so joint filers share one $10,000 cap. Interest paid on more than one qualifying loan is added together before the cap. Only the interest part of a payment counts, never the principal. A refinanced qualifying loan generally stays eligible on the refinanced amount, up to the original loan principal. The deduction is available whether or not you itemize, since it is an above-the-line adjustment. Amounts customarily financed with the purchase, such as sales tax, extended warranties, and service plans, can be part of the qualifying loan balance, while negative equity rolled over from a trade-in cannot.

The income phaseout works like this. The threshold is $100,000 of modified adjusted gross income, or $200,000 for joint filers. Above the threshold, the deduction is reduced by $200 for every $1,000 or part of $1,000 of income over the threshold, and it reaches zero at $150,000 for single filers or $250,000 for joint filers. Heads of household use the $100,000 threshold, since the final regulations give them no separate threshold. Take a single filer with $112,200 of modified adjusted gross income and $8,400 of qualifying interest: the excess over the threshold is $12,200, which rounds up to 13 units of $1,000, a reduction of $2,600, and a deduction of $5,800. The rounding up matters: even $1 over a $1,000 step costs the full $200 for that step.

The deduction falls by $200 for every $1,000 or part of $1,000 over the threshold.

Interest $8,400 (the page’s worked-example interest, below the $10,000 cap, so the cap does not bind here). Reduction = $200 × each $1,000 or part of $1,000 over the threshold, capped at the interest.

Single filers (threshold $100,000), interest $8,400

Joint filers (threshold $200,000), interest $8,400

Head of household uses the $100,000 threshold, like single filers (calculator script and filing-status tooltip).

With interest at or above $10,000, the counted interest is $10,000 and the deduction reaches $0 at $150,000 single / $250,000 joint (FAQ answer + script-verified).

The phaseout computation follows the IRS draft Schedule 1-A calculation for tax year 2025; check the final Schedule 1-A instructions before filing (article prose).

How the estimator works

The estimator follows the same arithmetic. It first checks every eligibility condition you answered, and if any fails it says so and names the reason, instead of giving a number that looks valid. If all conditions pass, it takes the smaller of your interest and the $10,000 cap, then subtracts the phaseout reduction, rounding any part of $1,000 over the threshold up to a full unit. The prefilled example is joint filers with $150,000 of modified adjusted gross income, below the $200,000 joint threshold, so there is no reduction and the full $8,400 of interest is the estimated deduction.

Three steps

Two cautions

Two cautions. First, the estimator uses the interest you enter, so it is only as good as that figure: use the interest from your lender statement, not your total monthly payment. Second, the phaseout computation follows the IRS draft Schedule 1-A calculation for tax year 2025, and the final Schedule 1-A instructions should be checked before filing, since forms for a new deduction can be revised.

What does not qualify

Short version: a used vehicle, a leased vehicle, a vehicle used for business or fleet purposes, a salvage-title vehicle, a vehicle assembled outside the United States, a vehicle rated at or above 14,000 pounds, a loan originated in 2024 or earlier, a loan that is not secured by a first lien, and a loan from a related party. Interest you already deducted on a business schedule cannot be deducted again here. If part of a loan relates to a non-qualifying use, the interest is split on a pro rata basis rather than treated as all or nothing.

Claiming the deduction

Where it is claimed

The deduction is claimed on Schedule 1-A, the additional deductions schedule for Form 1040, and the vehicle identification number for each qualifying vehicle goes on the return.

Reporting and final regulations

Lenders that receive $600 or more of qualifying interest in a year must report it and furnish a borrower statement, Form 1098-VLI, so keep that statement with your loan records. A valid Social Security number is required. Married couples generally file jointly to claim it; confirm the filing-status rule on the current Schedule 1-A instructions. Treasury and the IRS published final regulations on this deduction in September 2026, which confirm the points above, including that majority personal use is tested when the loan is incurred, so a later change in how the vehicle is used does not disqualify interest already accrued.

Frequently Asked Questions

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