Car loan interest deduction calculator

A deduction, not a credit: it reduces taxable income, not your tax bill dollar-for-dollar. Enter your numbers — we apply the $10,000 cap and the income phase-out.

Tax rules: IRS · Data updated: Jul 2026 · Not tax advice · Methodology
$
From Form 1098-VLI, box 1 — your lender sends it.
$
For most filers this is close to AGI. What's MAGI?
Your estimated deduction
$2,340
Full amount deductible

Advertiser disclosure
Refinance to a lower rate — you keep the deduction.
See how refinancing affects eligibility →
Preview states:
How the math works

The deduction equals your interest paid, capped at $10,000 per year. Above $100,000 MAGI ($200,000 joint) it shrinks by $200 for every $1,000 of income over the threshold — hitting $0 at $150,000 ($250,000 joint). Remember: this only applies if the vehicle passes the assembly test.

First, check your VIN →
No U.S. assembly, no deduction — whatever the numbers say.
Where to claim it →
Schedule 1-A, line by line, with Form 1098-VLI in hand.

Car Loan Interest Deduction Income Limit: 2026 Calculator + Phase-Out Table

The car loan interest deduction phases out above $100,000 modified adjusted gross income (MAGI) for single filers and $200,000 married filing jointly. The $10,000 annual cap shrinks by $200 for every $1,000 of MAGI over the threshold. It reaches zero near $150,000 single / $250,000 joint (IRS, tax years 2025–2028).

Enter your filing status, MAGI, and interest paid below. The calculator runs that exact formula ( IRS: OBBBA provisions ) and turns it into your cap and your real-dollar savings. One distinction before any math: this is a tax deduction, not a tax credit. It trims taxable income. It does not come back dollar for dollar.

The income limit: $100,000 single, $200,000 joint — then a slide, not a cliff

Search results treat the car loan interest deduction income limit as one number. It's two numbers and a slope. Crossing $100,000 erases nothing. The cap falls $200 per $1,000 over the threshold. A partial deduction survives to $149,000 single / $249,000 joint. Some early coverage cut its tables off at $100,000, which reads like a cliff. The statute draws a ramp (Section 70203, H.R.1).

Our table, computed from the Section 70203 formula. Thresholds per the IRS OBBBA provisions page . You'll see the zero-point $150k/$250k quoted everywhere. As a round number it's fine. Strictly, the round-up rule below kills the last $200 of cap once MAGI passes $149,000 or $249,000.

How the phase-out math works — worked example at $120,000

Your phaseout threshold depends on filing status: $100,000 single, $200,000 married filing jointly ( IRS: OBBBA provisions ). Above it, three steps set your cap.

Worked example — $120,000 MAGI, single filer. Excess over the $100,000 threshold: $20,000. Blocks of $1,000 in that excess: 20. Cap reduction: 20 × $200 = $4,000. Your cap: $10,000 − $4,000 = $6,000. First-year interest on a typical $40,000 loan: about $3,300 (our estimate). You deduct all $3,300 — it fits under the cap.

The round-up rule hides in four words of statute: "or portion thereof." A MAGI of $120,001 counts as 21 blocks over, not 20. The cap drops to $5,800 instead of $6,000. One dollar of income moved $200 of cap.

Here's what the table can't show: the slide often costs nothing. Typical first-year interest runs $3,000–4,000 (our estimate — see the savings section). At $3,500 of interest, a single filer's cap stays above actual interest until MAGI passes $132,000. That's our math from the statute formula. Between $100,000 and $132,000, the phase-out is real on paper and invisible on your return.

The slide, not a cliff. Single filer; the cap falls $200 for every $1,000 of MAGI over $100,000. Our computation from the Section 70203 formula.

What you'll actually save — a deduction, not a credit

Deduction × marginal rate = your tax bracket savings. $3,300 of deductible interest in the 22% bracket returns about $726. Not $3,300, and nowhere near $10,000. The most-upvoted skeptic take of the first filing season did this math in public:

"Let's assume $50k purchase, 72 months, and 5% interest. This person will be paying $800/mo for their brand new car, and in the first year $7300 of that will go towards principal and $2300 of that will go to interest. … If they deduct $2300 from their income, it will save them ~$350 in taxes." — r/GoldandBlack, January 2026

He's right. The calculator above shows the same shape with your numbers. The $10,000 cap gets the headlines; real interest rarely gets near it. Paying $10,000 of interest in year one takes roughly $150,000 financed at 7% APR (our math). A typical new-car loan generates $3,000–4,000 of first-year interest. That's worth about $350–900 back at the 12–24% brackets (our estimate; the widget uses your actual figures).

None of that makes the deduction worthless. It stacks on the standard deduction — no itemizing required ( IRS guidance, IR-2025-129 ). It repeats every tax year from 2025 through 2028. The widget totals the four-year value for your loan. Real money; just not "$10,000."

Refinancing and your deduction

Refinancing doesn't cost you the write-off. The IRS says it plainly: interest on the refinanced amount of a qualifying loan generally stays deductible ( IRS: OBBBA provisions ). Holding a 9–11% APR from 2025's rate peak? Refinance to a lower rate — you keep the deduction. The rate cut can be worth more than the write-off itself. A 2-point APR drop on a $35,000 balance saves about $700 of interest in year one (our math), before any tax benefit starts.

Two boundaries. The original loan must itself have originated after December 31, 2024. Refinancing a 2023 loan creates no eligibility. And only interest on the refinanced principal counts; a cash-out slice on top doesn't. Break-even math and mid-year lender paperwork live in the refinance guide .

FAQ

What counts as MAGI for this deduction?

Your adjusted gross income (Form 1040, line 11), plus any income excluded as foreign earned income or as Puerto Rico or American Samoa income (Section 70203, H.R.1). No foreign exclusions — true for most filers — means MAGI simply equals AGI. That's why the calculator accepts AGI.

Частые вопросы

What's the limit for married filing separately?

$100,000. The statute reserves the $200,000 threshold for joint returns. Every other filing status, married filing separately included, phases out above $100,000 MAGI (Section 70203, H.R.1). Proposed regulations were still open for comment in early 2026 — check the Schedule 1-A instructions for your filing year.

Do the limits change between 2025 and 2028?

No. The $10,000 cap and the $100,000/$200,000 thresholds sit fixed in the statute, with no inflation adjustment. The deduction ends after tax year 2028 ( IRS: OBBBA provisions ).

What if I claim it and my MAGI turns out higher?

Estimates drift. A year-end bonus or a Roth conversion can move MAGI after you've budgeted. The fix is Form 1040-X, an amended return. Keep your Form 1098-VLI (lenders mail it in January) and your loan statement, so the interest figure is provable (IRS: Schedule 1-A instructions). Running the calculator with a high-side MAGI estimate is cheap insurance.

Which cars qualify in the first place?

Income is only half the test. The vehicle must be new, personal-use, under 14,000 lbs GVWR, and US final-assembled. The loan must be post-2024 and secured by the car ( IRS: OBBBA provisions ). Check your VIN in 60 seconds at the VIN checker . The remaining rules live in the full deduction guide .