How to use this calculator
- Choose the tax year and the filing status you will use.
- Enter your wages and your children under 17.
- Untick any of the four statements that isn't true of your vehicle or your loan.
- Estimate the interest from your loan (the amount financed, the APR, the term and the month you signed), or choose to enter the figure your lender reports: box 1 of Form 1098-VLI for 2026 on, or your lender's 2025 interest statement.
- Under More options, add other income, a second loan, interest you deduct as a business expense, the age and blindness boxes, itemized deductions, and any tips or overtime deductions you take.
The numbers already filled in are an example. Replace them with your own. The deduction lowers the tax on your return; your paychecks don't change unless you give your employer a new Form W-4.
Does my loan qualify?
The car loan interest deduction covers interest on a loan you took out after 2024 to buy a vehicle, secured by it, when all of these are true:
- It's new. Its original use starts with you, and your loan papers treat it as a new vehicle. A dealer's demonstrator can count if the loan treats it as new. A used vehicle, or one you buy at the end of your lease, doesn't.
- It's the right kind of vehicle. A car, minivan, van, SUV, pickup or motorcycle, made mainly for use on public roads, with a gross vehicle weight rating under 14,000 pounds. A vehicle built with living quarters can count if it meets these tests, as the final regulations confirm.
- Its final assembly was in the United States. The window sticker shows the final assembly point, and NHTSA's VIN decoder reports the plant where it was made.
- The loan is yours and is secured by the vehicle. You took out the loan, and the lender holds a first lien on the vehicle. A credit card, an unsecured personal loan or a home equity loan doesn't count, and nor does a lease or a loan from a parent, child, grandparent, grandchild, brother, sister or spouse, or from a company you control. A loan you take over from someone else counts only if it came to you on their death. On a joint return, the loan can be in either spouse's name.
- You use it mostly for personal driving. When you took out the loan, you expected you or your family to use it for personal driving more than half the time. Driving for your employer counts as personal. A car you drive for a rideshare service 15% of the time qualifies; one you use 60% of the time in your own business doesn't.
You also have to put the vehicle identification number (VIN) on Schedule 1-A for each loan you claim.
Which parts of the loan count
The part of the amount financed that paid for the vehicle and the things usually financed with it counts: sales tax, title and registration fees, service contracts, warranties, GAP insurance and credit insurance. The part that paid off negative equity on a trade-in, gave you cash, bought ordinary car insurance or bought something else, like a trailer, doesn't. Your down payment, including your trade-in's equity, is applied to the parts that don't count first. Each interest payment is split in proportion.
Take the example loan with $6,000 of negative equity rolled in and a $4,000 down payment: the down payment covers $4,000 of the negative equity, so $2,000 of the $42,000 financed doesn't count, and 95.2% of each interest payment does. That makes the 2026 deduction $2,213.72 instead of $2,324.40.
Refinancing
When you refinance a qualifying loan, the new loan counts up to the old loan's balance on the day you refinance. Cash you take out doesn't count. A refinance of a loan that didn't qualify, such as one taken out before 2025, doesn't qualify either. To enter a refinanced loan, describe the new loan, put the cash out under More options, and add the interest you paid on the old loan earlier in the year as interest on another loan.
How it's calculated
The deduction comes from section 163(h)(4) of the tax code and Part IV of Schedule 1-A. The calculator works out the qualifying interest you pay in the year, caps it, reduces it for high incomes, and figures your federal income tax twice: once without the deduction and once with it. The difference is what the deduction is worth.
An example
Say you file single for 2026, your wages are $80,000, and in February 2026 you financed $42,000 at 7.00% for 72 months. The monthly payment is $716.06, and the first is due in March 2026. The interest part of each payment is the balance times a twelfth of the rate, so your 10 payments in 2026 include $2,324.40 of interest. That is under the $10,000 cap, and your income is under the $100,000 where the phase-out starts, so all of it is deductible. Without it, your taxable income is $63,900 and your federal income tax is $8,776. With it, your taxable income is $61,575.60 and your tax is $8,259. The deduction is worth $517 to you this year.
Over its life the loan charges $9,556.22 of interest. Only the $6,688.06 paid in 2025 through 2028 can be deducted; under current law, the $2,868.16 paid after 2028 can't.
The cap and the phase-out
The deduction is capped at $10,000 of interest a year for the whole return, whatever your filing status and however many loans you have. It is then reduced by $200 for every $1,000 of modified adjusted gross income over $100,000 ($200,000 on a joint return), and any part of $1,000 counts as a whole $1,000. A single filer with $124,200 of income and $7,000 of interest is $24,200 over, which rounds up to 25 steps, so $5,000 comes off and the deduction is $2,000. It is worth $480 to them. With the full $10,000 of interest the deduction is gone once income is more than $149,000 ($249,000 on a joint return).
Why the child tax credit matters
The deduction lowers your tax, but if the child tax credit already covers most of that tax, a lower tax may not help much. The credit's unused part can be paid to you as the additional child tax credit, up to a limit. Take a head of household with one child, $30,000 of wages and $3,000 of car loan interest. The deduction lowers their income tax by $302 before credits. After credits their tax is $0 either way, and their refundable credit rises by $88, so the deduction is worth $88 to them, not $302.
What it does and doesn't change
The deduction comes after your adjusted gross income, beside the standard deduction or itemized deductions, and is on the same schedule as the tips, overtime and senior deductions, which the calculator counts first, so the car loan deduction is priced on top of them. It doesn't change your adjusted gross income, so it doesn't change the earned income credit or other amounts figured from it.
Assumptions and limits
- The loan you describe, or the interest you enter, is for a vehicle and loan that meet the four statements you left ticked and the other conditions above. The calculator doesn't check a VIN.
- The estimate uses a standard monthly schedule at your APR, with the first payment one month after signing, every payment made on time and no extra payments. The rules count interest by the day, and a first payment can come later than a month after signing, so the first year's figure can differ by a few percent and later years by a few dollars. Points, capitalized interest and fees a lender reports as interest are not in the estimate. Your lender's figure is the one to file with.
- It figures federal income tax, the child tax credit, the credit for other dependents and the additional child tax credit. It does not figure other credits; the earned income credit doesn't change with this deduction. With three or more children, when Schedule 8812 sends you to Part II-B, it uses Part II-A and says so.
- It does not include state income tax, the alternative minimum tax, the net investment income tax, the Additional Medicare Tax, student loan interest or the 2026 charitable deduction for people who don't itemize. If you deduct student loan interest, your income here is too high by that amount, which in the phase-out can cut the deduction by up to $600 more than it should. Modified adjusted gross income is your adjusted gross income: the Puerto Rico and foreign income exclusions are not included.
- Earned income for the refundable child tax credit is your wages; business profit you enter as other income is not counted there, so a self-employed reader with children may see a smaller refundable credit than they would get. The qualified business income you enter is used as figured on Form 8995, without the wage and property limits that apply above the income threshold.
- If you're married filing separately and receive Social Security, the taxable part of your benefits is figured as if you lived with your spouse at some time during the year.
- Below $100,000 of taxable income the tax comes from the IRS Tax Table, and at $100,000 or more from the Tax Computation Worksheet. With qualified dividends or long-term capital gains, it uses the Qualified Dividends and Capital Gain Tax Worksheet, which taxes those at their lower rates. For a year whose Tax Table is not printed yet, the calculator builds it the way the IRS does, from the middle of each row.
- The loan table holds your income and filing status at this year's for every year. The deduction runs for 2025 through 2028 only, and interest paid after 2028 is not deductible under current law.
- It is for an individual's return. Estates and trusts can also take the deduction, and a replacement vehicle under a state lemon law has its own rule; neither is covered.
- The deduction lowers the tax on your return. It doesn't change what your employer withholds unless you give them a new Form W-4; the IRS Tax Withholding Estimator can help you fill one in.
Input field details
What to enter in each box, where to find the number, and how this calculator treats it. When two calculators give different answers from the same numbers, it's usually because they handle one of these differently.
Filing status
The status you will file under for the tax year.
How this tool treats itThe deduction is capped at $10,000 of interest for the whole return, whatever your status: a married couple filing jointly shares one cap, and a separate return keeps the whole $10,000. It starts to shrink above $200,000 of modified adjusted gross income on a joint return and above $100,000 on every other return, head of household and qualifying surviving spouse included. Married people filing separately can take it.
Wages
Your wages for the year. On a joint return, add your spouse’s.
Where to find itForm W-2, box 1. With more than one job, add the box 1 amounts.
How this tool treats itModified adjusted gross income, which sets the phase-out, is your adjusted gross income (Form 1040 line 11) here, because the foreign and possession income exclusions that would be added back are not included. The car loan interest deduction itself does not lower it. Your wages are also your earned income for the refundable part of the child tax credit.
Allowed range$0 to $2,000,000
Children under 17
Your qualifying children who are under 17 at the end of the year and have a Social Security number valid for work.
How this tool treats itThe child tax credit first reduces your income tax. What is left can come back to you as the additional child tax credit, the refundable part, up to a fixed amount a child and to 15% of your wages over $2,500. The car loan interest deduction lowers your tax, which can leave more of the credit to be refunded, so its worth to a family can be a larger refund rather than a lower tax. The credit shrinks by $50 for each $1,000 (or part of one) of modified adjusted gross income over $400,000 on a joint return, or $200,000 otherwise.
Allowed range0 to 10
Not includedPart II-B of Schedule 8812, which can give a larger refundable credit to a family with three or more children. The calculator uses Part II-A and says when Part II-B may give more.
A new car, SUV, van, pickup or motorcycle
Leave it ticked if the vehicle was new when you bought it and is one of those kinds; untick it if it was used.
How this tool treats itThe law calls it an applicable passenger vehicle: a car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds, made mainly for public roads. Its original use has to start with you, and for a financed purchase the loan papers must treat it as new. A dealer’s demonstrator can qualify when the papers treat it as new; a used vehicle, a vehicle you buy at the end of a lease and a truck of 14,000 pounds or more do not. A vehicle built with living quarters can qualify if it meets these tests.
Final assembly in the U.S.
Leave it ticked if the vehicle’s final assembly took place in the United States; untick it if it did not.
Where to find itThe final assembly point on the vehicle’s window sticker, or the plant of manufacture in its vehicle identification number (VIN), which the NHTSA VIN decoder reports.
Not includedDecoding a VIN. The calculator takes your answer.
A loan in your name, taken out after 2024, secured by it
Leave it ticked if you took out the loan yourself after December 31, 2024, to buy the vehicle, and the lender holds a first lien on it; untick it otherwise.
How this tool treats itA first lien means the lender has the first claim on the vehicle if the loan is not repaid. A lease does not count, and neither does a credit card, an unsecured personal loan or a home equity loan, none of which is secured by the vehicle. A loan from a parent, grandparent, child, grandchild, brother, sister or spouse, or from a company you control, does not count; one from a cousin or an in-law can. A loan you took over from someone else does not count unless it came to you on their death. A refinance counts only if the loan it replaced did, so refinancing a 2023 loan in 2025 does not make it qualify. On a joint return the loan can be in either spouse’s name.
Used mostly for personal driving
Leave it ticked if, when you took out the loan, you expected you or your family to use the vehicle for personal driving more than half the time.
How this tool treats itDriving as an employee, such as a commute, counts as personal use. Someone who drives 15% of the time for a rideshare service still qualifies; someone who uses the truck 60% of the time in their own contracting business does not. A vehicle a child uses by themselves qualifies.
Interest for the year
Choose to estimate the interest from your loan’s terms, or to enter the figure from your lender.
Where to find itFor 2026 and later, your lender’s Form 1098-VLI, box 1, sent by January 31. For 2025, your lender could give you a statement of the year’s interest instead, online or with a monthly or year-end statement.
How this tool treats itThe deduction is for qualified passenger vehicle loan interest: interest paid in the year on the part of the loan that bought the vehicle. The lender’s figure is the one to file with. An estimate from the loan’s terms is useful before that figure arrives, and for seeing how the interest falls across 2025 to 2028.
Amount financed
The amount the loan covers, after any down payment and trade-in.
Where to find itYour loan contract, the “Amount Financed” box of the Truth in Lending disclosure.
How this tool treats itThe calculator works out a standard monthly schedule: a level payment at your APR, the first payment one month after the month you signed, each payment paying that month’s interest first. The interest a payment makes in a calendar year counts in that year. The last payment adjusts so the loan pays off exactly.
Allowed range$1,000 to $250,000
Not includedDaily interest, an odd first period, late or extra payments, balloon payments, variable rates, and points or fees a lender reports as interest.
Interest rate (APR)
The annual percentage rate on your loan contract.
Where to find itYour loan contract, the “Annual Percentage Rate” box.
How this tool treats itEach month the calculator charges a twelfth of the APR on the balance. A 0% promotional loan charges no interest, so there is nothing to deduct.
Allowed range0% to 30%
Term in months
The number of monthly payments on your contract.
Where to find itYour loan contract, the payment schedule.
Allowed range12 to 96
Month the loan was signed
The month and year you signed the loan contract.
How this tool treats itThe first payment is taken to be one month later. Interest paid after 2028 is not deductible under current law, so a later start leaves more of the loan’s interest outside the deduction’s years.
Allowed rangeJanuary 2025 to December 2028
Qualifying interest you paid
The interest you paid in the year on every qualifying car loan, added together.
Where to find itFor 2026 and later, Form 1098-VLI, box 1. For 2025, your lender’s statement of the interest you paid in 2025.
How this tool treats itBox 1 of Form 1098-VLI already leaves out interest on any part of the loan that doesn’t count. A 2025 statement may show all of the loan’s interest; if the loan also paid off negative equity, gave you cash or bought a trailer, count only the vehicle’s share. A lender that received less than $600 of interest on a loan may send no form, and that interest still counts.
Allowed range$0 to $200,000
Negative equity, cash out and other amounts that don’t count
The part of the amount financed that did not buy the vehicle, before any down payment.
Where to find itYour loan contract’s itemization of the amount financed.
How this tool treats itNegative equity is what you still owed on a trade-in beyond its value, rolled into the new loan. It does not count, and neither does cash the lender paid you, a trailer or boat, or car insurance other than credit insurance. Sales tax, title and registration fees, service contracts, warranties and GAP bought with the vehicle do count. Each payment’s interest counts in proportion to the part of the amount financed that bought the vehicle, rounded to the cent. On a refinance, enter the cash out plus any part of the old balance that did not count.
Allowed range$0 to $250,000
Not includedAn add-on financed after the purchase, such as GAP bought at a refinance, which does not count at all.
Down payment, including trade-in equity
The cash you paid up front plus any equity in your trade-in.
Where to find itYour loan contract or the buyer’s order.
How this tool treats itThe regulation applies a down payment first to the amounts that don’t count, so it shrinks them before it shrinks the vehicle’s share. Any down payment beyond those amounts is already out of the amount financed and changes nothing here.
Allowed range$0 to $250,000
Interest on another qualifying car loan
The qualifying interest you paid in the year on any other car loan, such as a second vehicle’s, or the loan you refinanced earlier in the year.
Where to find itThat lender’s Form 1098-VLI, box 1, or for 2025 its interest statement.
How this tool treats itThe $10,000 cap covers every car loan on the return together.
Allowed range$0 to $200,000
Interest you deduct as a business expense
The part of the year’s car loan interest you deduct for business use of the vehicle.
Where to find itSchedule C, E or F (Form 1040).
How this tool treats itThe same interest cannot be deducted twice, so this comes off before the $10,000 cap. The choice of how much to deduct where is yours; the calculator takes your split. Business profit you enter as other income should already be after this interest.
Allowed range$0 to $200,000
Not includedChoosing the best split. Interest above the $10,000 cap may be deductible as a business expense for the business share of the vehicle’s use.
65 or older
Tick it if you were born before January 2 of the year 64 years before the tax year (for 2026, before January 2, 1962). On a joint return, tick your spouse’s too if it applies.
How this tool treats itThe IRS treats you as reaching 65 on the day before your 65th birthday. Each tick adds to your standard deduction, and for 2025 through 2028 also gives a $6,000 senior deduction that shrinks by 6% of modified adjusted gross income over $75,000, or $150,000 on a joint return. It is not allowed on a separate return.
Blind
Tick it if you are blind at the end of the year. On a joint return, tick your spouse’s too if it applies.
How this tool treats itBlind here means vision no better than 20/200 in the better eye with glasses or contacts, or a field of vision of 20 degrees or less. Each tick adds to the standard deduction.
Other dependents
Dependents who are not children under 17 with a Social Security number: an older child, a parent you support.
How this tool treats itEach gives a $500 credit against your income tax. It is never refundable.
Allowed range0 to 10
Other taxable income
Taxable income other than your wages, Social Security and qualified dividends and long-term gains: interest, pensions, IRA withdrawals, nonqualified dividends, business profit.
Where to find itForm 1040 lines 2b, 4b and 5b, Schedule 1 line 3 for business profit, and nonqualified dividends (Form 1099-DIV box 1a minus box 1b).
How this tool treats itBusiness profit is after any car loan interest you deduct as a business expense. It is not counted as earned income for the child tax credit here.
Allowed range$0 to $5,000,000
Not includedLosses. Enter a net loss as 0.
Qualified dividends and long-term capital gains
Qualified dividends plus your net long-term capital gain. Leave them out of other taxable income.
Where to find itForm 1099-DIV box 1b for qualified dividends; Schedule D, or 1099-DIV box 2a if you do not file Schedule D.
How this tool treats itThese are taxed at 0%, 15% or 20%, stacked on top of your ordinary income. The deduction lowers ordinary income first, so it can move some gains into the 0% band.
Allowed range$0 to $5,000,000
Social Security benefits
Your net benefits for the year. On a joint return, add your spouse’s.
Where to find itBox 5 of Form SSA-1099.
How this tool treats itPart of your benefits may be taxable, figured with IRS Publication 915’s worksheet, and that part is in your modified adjusted gross income. The car loan interest deduction comes after adjusted gross income, so it does not change how much of your benefits is taxable.
Allowed range$0 to $200,000
Adjustments to income
Deductions you take before adjusted gross income, already figured: a deductible IRA contribution, HSA contributions, half of self-employment tax, self-employed health insurance and retirement contributions.
Where to find itSchedule 1 (Form 1040), lines 11 through 20, 23 and 25.
How this tool treats itLeave out student loan interest, which this calculator does not compute; if you deduct it, your adjusted gross income here is too high by that amount, which in the phase-out range can cost up to $600 of car loan interest deduction that you would keep. 401(k) contributions are already out of W-2 box 1, so do not enter them here.
Allowed range$0 to $1,000,000
Itemized deductions
Your total itemized deductions, if you itemize. Leave it at 0 to use the standard deduction.
Where to find itSchedule A (Form 1040), line 17.
How this tool treats itThe calculator uses whichever is larger, your itemized total or your standard deduction. You can take the car loan interest deduction either way.
Allowed range$0 to $5,000,000
Tips and overtime deductions
Your tips deduction and your qualified overtime deduction, added together.
Where to find itSchedule 1-A (Form 1040), lines 13 and 21 (2025 form).
How this tool treats itSchedule 1-A is the form for the four deductions for 2025 through 2028: tips, overtime, car loan interest and the senior deduction. Its total goes on Form 1040 line 13b for 2025 (line 13a on the 2026 draft), after adjusted gross income and beside the standard or itemized deduction, so none of the four changes adjusted gross income. The senior deduction is figured for you from the age boxes; do not include it here.
Allowed range$0 to $50,000
Qualified business income
The qualified business income of a business you own, as figured for the qualified business income deduction. Include its profit in other taxable income too.
Where to find itForm 8995, line 2 (line 4 when you carry in a loss).
How this tool treats itThe deduction is 20% of it, limited to 20% of taxable income less qualified dividends and long-term gains. The car loan interest deduction lowers taxable income, so it can lower that limit, and then it lowers your taxable income by a little less than its own amount.
Allowed range$0 to $2,000,000
Not includedFiguring qualified business income, self-employment tax, and the W-2 wage and property limits above the income threshold.
Questions
Is car loan interest tax-free now?
Do I have to itemize to take it?
Does a used car count?
How do I know where my car was assembled?
Does a lease count?
What if I refinance?
Can we claim it filing separately?
Why doesn’t head of household get a higher threshold?
Where do I find the interest I paid?
Why is my answer different from my tax bracket times the interest?
Does my state follow it?
Version history
- September 26, 2026 (version 1.0.0): First version.