The car loan interest deduction was introduced by the One Big Beautiful Bill Act (OBBB Act) for tax years 2025 through 2028. Taxpayers who finance the purchase of a new vehicle assembled in the United States can deduct up to $10,000 per year in auto loan interest from their federal taxable income — without needing to itemize. Use this calculator to estimate your eligible deduction and potential tax savings.
Vehicle Eligibility Check
All four conditions must be met to qualify for the auto loan interest deduction:
Check NHTSA AALA database to verify your vehicle's final assembly location.
Enter Your Loan Details
Your highest federal income tax rate
Total interest paid on your auto loan this year
Wages + other income — used for phase-out calculation
Don't know your annual interest? Estimate it:
Deduction Breakdown
MAGI Phase-Out Details
Vehicle Eligibility Summary
Verify your vehicle's assembly location at the NHTSA AALA database.
Estimate only. This calculator provides estimates based on the OBBB Act auto loan interest deduction for tax years 2025-2028. Does not apply to leases or used vehicles. Consult a tax professional for advice tailored to your situation.
How to Use This Car Loan Interest Deduction Calculator
The One Big Beautiful Bill Act created a new tax benefit for Americans who finance the purchase of new, US-assembled vehicles. For tax years 2025 through 2028, you can deduct up to $10,000 per year in auto loan interest directly from your taxable income — no itemizing required. This calculator helps you determine your eligible deduction amount and estimate your actual tax savings based on your income and filing status.
Step 1: Verify Vehicle Eligibility
Before calculating your deduction, confirm that your vehicle meets all four requirements: it must be brand new, have its final assembly in the United States, be financed with a loan (not leased), and purchased during tax years 2025 through 2028. Check the boxes in the eligibility section above. You can verify US assembly using the NHTSA American Automobile Labeling Act database or your vehicle's window sticker.
Step 2: Enter Your Filing Status and Tax Bracket
Select your federal tax filing status — this determines the MAGI thresholds where the deduction phases out ($100,000 for single, $200,000 for married filing jointly). Then choose your marginal tax bracket, which is used to estimate how much the deduction will actually save you in federal income tax. The deduction is above-the-line, meaning it reduces your adjusted gross income directly.
Step 3: Enter Your Interest and Income
Enter the total car loan interest paid during the tax year. If you do not know this amount, use the estimator tool to calculate approximate annual interest from your loan balance and interest rate. Then enter your modified adjusted gross income (MAGI) — your total income from wages, investments, and other sources — which determines whether the phase-out applies to your deduction.
Understanding the MAGI Phase-Out
The auto loan interest deduction phases out over a $50,000 MAGI range. For single filers, the phase-out starts at $100,000 and ends at $150,000. For married filing jointly, it runs from $200,000 to $250,000. If your MAGI falls within this range, only a proportional share of the deduction is allowed. For example, a single filer with $125,000 MAGI would retain 50% of their deduction. Above the upper threshold, no deduction is available.
Key Limitations to Know
The deduction applies only to interest on loans for new vehicles with US final assembly. Used cars, leased vehicles, and vehicles assembled outside the US do not qualify. The maximum annual deduction is $10,000 regardless of filing status. Only the interest portion of your auto loan payments is deductible — principal payments are not. The deduction reduces your federal income tax but does not affect state taxes unless your state conforms to this federal provision.
Frequently Asked Questions
What is the car loan interest deduction from the OBBB Act?
The One Big Beautiful Bill Act created a new above-the-line deduction allowing taxpayers to deduct interest paid on auto loans for new vehicles assembled in the United States. The maximum deduction is $10,000 per year, and the provision applies to tax years 2025 through 2028. You do not need to itemize deductions to claim it.
Which vehicles qualify for the car loan interest deduction?
To qualify, the vehicle must be brand new (not used) and have its final assembly in the United States. Leased vehicles do not qualify — only financed purchases. You can verify whether a specific vehicle was assembled in the US using the NHTSA American Automobile Labeling Act (AALA) database or checking the vehicle's window sticker.
What is the MAGI phase-out for the auto loan interest deduction?
The deduction begins to phase out at $100,000 MAGI for single filers and $200,000 for married filing jointly. The phase-out range is $50,000, meaning the deduction is fully eliminated at $150,000 (single) or $250,000 (MFJ). If your income falls within the phase-out window, only a proportional share of the deduction is allowed.
Can I deduct interest on a used car loan?
No. The OBBB Act auto loan interest deduction only applies to new vehicles. Used car purchases, even for US-assembled vehicles, do not qualify. Additionally, the vehicle must be purchased (financed with a loan), not leased. Only the interest portion of your loan payments is deductible, not the principal.
Is this car loan interest deduction calculator really free?
Yes, this calculator is completely free to use with no account or signup required. All calculations run locally in your browser using JavaScript — no financial data is ever sent to any server. Your income and loan information stays completely private on your device.
Is my financial data safe when using this calculator?
Absolutely. Every calculation runs entirely in your browser. No income figures, loan details, or personal information leaves your device at any point. You can disconnect from the internet and the calculator will continue to work. Your privacy is fully protected.
How do I find out if my car was assembled in the US?
Check the vehicle's window sticker (Monroney label) which lists the final assembly location, or search the NHTSA American Automobile Labeling Act database at nhtsa.gov. Many popular models from manufacturers like Ford, GM, Toyota, Honda, and Hyundai have US final assembly plants. The VIN number can also indicate the country of assembly — VINs starting with 1, 4, or 5 indicate US assembly.
How long does the car loan interest deduction last?
The auto loan interest deduction is available for tax years 2025 through 2028. It is a temporary provision under the OBBB Act. Unless Congress extends or makes it permanent, the deduction will expire after the 2028 tax year. Interest paid on qualifying loans before or after these years is not deductible under this provision.