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.