Car loan interest deduction in South Carolina

The car loan interest deduction is a federal benefit. What it means for your South Carolina return depends on whether South Carolina taxes income and how it follows the federal rules.

Federal rules: IRS · State conformity varies · Not tax advice · Methodology
!
Federal: yes · State: depends on conformity
South Carolina has a state income tax, so state treatment depends on how South Carolina conforms to federal rules.
The short answer

The federal car loan interest deduction (tax years 2025–2028) applies in South Carolina the same as anywhere — if your vehicle is new, personal-use, US-assembled, financed with a 2025–2028 loan, and your income is under the phase-out. Whether it also lowers your South Carolina state tax depends on state conformity — see below.

How state conformity works

Because the deduction is above-the-line, it reduces your federal adjusted gross income (AGI). Most states that start their own income tax from your federal AGI carry above-the-line federal deductions through automatically — which would mean the deduction lowers your South Carolina taxable income too. But states can set their conformity date or specifically decouple from a federal provision, and this deduction is brand new for 2025.

So the honest answer for South Carolina is: it likely flows through if South Carolina conforms to federal AGI and has not decoupled — but you should confirm with the South Carolina Department of Revenue or a tax professional before counting on the state benefit. The federal deduction itself is not in doubt.

Confirm your federal eligibility first

State treatment only matters if you qualify federally. Check the three tests that trip people up:

Is your vehicle US-assembled? Decode the VIN→ Is your income under the phase-out? Run the calculator→ How to claim it on your federal return→
See all states Check your VIN →
Advertiser disclosure
Financing in South Carolina? A lower rate means less interest.
The qualifying interest is what's deductible federally. Compare partner lenders; checking won't affect your credit score.
How it works →