Auto Loan Interest Tax Deduction Calculator

The OBBBA creates a new above-the-line deduction for interest paid on auto loans for qualifying vehicles. This deduction works similarly to the student loan interest deduction or the mortgage interest deduction — reducing your taxable income by the amount of interest you pay, up to the annual cap.

Qualification Requirements

To qualify for the auto loan interest deduction, your vehicle and loan must meet all of the following criteria:

• The vehicle must be new — used vehicles, certified pre-owned vehicles, and leases do not qualify. The vehicle must be purchased, not leased.
• The vehicle must be assembled in the United States — this includes vehicles from both domestic and foreign manufacturers, as long as the final assembly took place at a US plant
• Maximum deduction: $10,000 in interest per year — if your annual interest exceeds this, only $10,000 is deductible
• The loan must be taken out after the law takes effect — existing auto loans taken before the OBBBA do not qualify

Income Limits

The deduction phases out for single filers with MAGI above $100,000 and for married filing jointly above $200,000. The phaseout range is $30,000, meaning the deduction is fully eliminated at $130,000 (single) or $230,000 (MFJ).

Worked Example: David and Sarah Buy a New Truck

David and Sarah live in Michigan and decide to buy a new Ford F-150 assembled at the Dearborn plant. They finance $42,000 at 6.5% APR over 60 months. Their combined household income is $130,000 and they file married filing jointly.

• Monthly payment: approximately $822
• First year interest: approximately $2,600
• Vehicle is new and US-assembled: qualifies
• Income ($130,000) is below $200,000 MFJ phaseout: full deduction
• Deduction amount: $2,600
• Marginal tax rate at $130,000 MFJ: 22%
• Annual tax savings: $2,600 x 22% = $572

Over the life of the 5-year loan, David and Sarah could save approximately $2,000 in federal taxes from this single provision — effectively reducing their cost of financing the truck.

How to Check if Your Vehicle is US-Assembled

There are several ways to verify that a vehicle qualifies:

• Check the window sticker (Monroney sticker) — every new vehicle has a window sticker that lists the country of assembly. Look for "Final Assembly Point" or "Country of Assembly."
• Look up the VIN — the National Highway Traffic Safety Administration (NHTSA) provides a free VIN lookup tool at vpic.nhtsa.dot.gov. Enter your VIN to see plant location.
• Check the American Automobile Labeling Act (AALA) report — NHTSA publishes annual reports listing the US/Canadian content and assembly location for all vehicles sold in the US
• Ask the dealer — dealerships can confirm the assembly location using the vehicle's build data

Popular US-Assembled Vehicles

Many popular models are assembled in the United States, including vehicles from both domestic and foreign manufacturers:

• Ford — F-150, Explorer, Bronco, Mustang (various US plants)
• Chevrolet — Silverado, Equinox, Traverse (various US plants)
• Toyota — Camry (Georgetown, KY), RAV4 (Georgetown, KY), Tundra (San Antonio, TX)
• Honda — Accord (Marysville, OH), CR-V (East Liberty, OH), Civic (Greensburg, IN)
• Tesla — Model 3, Model Y, Model S, Model X (Fremont, CA and Austin, TX)
• BMW — X3, X4, X5, X6, X7 (Spartanburg, SC)
• Hyundai — Santa Fe, Tucson, Elantra (Montgomery, AL)

Source: IRS.gov | Congress.gov — One Big Beautiful Bill Act