Personal car loan interest can now be deducted for the first time since 1986. This rule applies to tax years 2025 through 2028. Confirmed in IRS Topic No. 505 and IRS News Release IR-2025-129.
1. Deduction amount
You can deduct up to $10,000 per year of qualified passenger vehicle loan interest.
“For tax years 2025 through 2028 you can take an annual deduction of up to ten thousand dollars of qualified passenger vehicle loan interest.”
IRS Topic No. 505
2. Income limits
Full deduction:
- Single: AGI up to $150,000
- Married filing jointly: AGI up to $300,000
Partial deduction:
- Single: $150,000 to $200,000
- Married filing jointly: $300,000 to $400,000
No deduction:
- Single: AGI above $200,000
- Married filing jointly: AGI above $400,000
3. Vehicle requirements
- The vehicle must be new.
- Final assembly must occur in the United States.
- GVWR must be under 14,000 pounds.
- You must be the first user of the vehicle.
Chevrolet, Buick and GMC examples that fit these rules
A helpful real-world breakdown comes from Napleton Chevrolet Buick GMC Beaver Dam , which highlights common models that often meet the U.S. assembly and weight requirements when purchased new.
- Compact SUVs: Chevrolet Equinox, Trailblazer, Buick Encore GX, Buick Envista.
- Midsize SUVs: Chevrolet Traverse, Buick Enclave, GMC Acadia.
- Large SUVs: Certain configurations of Chevrolet Tahoe and GMC Yukon depending on assembly location.
- Pickup trucks: Chevrolet Silverado and GMC Sierra models under 14,000 pounds GVWR.
- Vans: Chevrolet Express and GMC Savana where available.
Assembly location varies by trim and model year, so they recommend checking the certification label on the doorjamb or verifying through the VIN. Their full overview is available here: What Cars Qualify for 2025 Tax Deductions .
4. Loan requirements
- The loan must be taken out after December 31 2024.
- It must be a first-lien auto loan.
- Interest must be paid or accrued during the tax year.
- Leases do not qualify.
5. Who can take the deduction
- Standard deduction filers
- Itemizers
Confirmed in IRS Topic No. 505.
6. Example
You buy a new U.S.-assembled vehicle in 2026 and pay $4,200 of interest. With a joint AGI of $250,000 you qualify for the full deduction.
- The full $4,200 is deductible.
- In the 22% bracket that reduces your tax by $924.
7. Vehicles and loans that do not qualify
- Used vehicles
- Vehicles assembled outside the United States
- GVWR over 14,000 pounds
- Leased vehicles
- Loans from 2024 or earlier
- Refinances that are not first lien loans
- AGI above the limit
8. IRS sources
IRS Topic No. 505: https://www.irs.gov/taxtopics/tc505
IRS News Release IR-2025-129: IRS Announcement
