In short: the OBBBA car loan interest deduction is a personal-use benefit. If you're self-employed and your vehicle is used for business, that interest is handled under the business-expense rules instead — and you can't deduct the same interest twice. The line between personal and business use is what decides which path your loan interest takes.
Self-employed buyers have the most to gain here and the most to get wrong. Get the classification right and you either take a clean personal deduction, a clean business deduction, or a defensible split — but never both on the same dollars.
The core rule: personal use, or business use, not both
The car loan interest deduction created by the One Big Beautiful Bill Act applies to new, personal-use vehicles assembled in the United States, financed with a loan taken in 2025–2028, with the interest capped at $10,000 a year and phased out above $100,000 MAGI (single) / $200,000 (joint). It's an above-the-line adjustment on Schedule 1-A.
Business-vehicle interest is different. When you use a vehicle for your trade or business, the interest attributable to that business use is generally deducted as a business expense on your business schedule — not on Schedule 1-A. That's a separate mechanism with its own rules, and it existed long before the OBBBA deduction.
You cannot run the same interest through both. A dollar of interest is either personal (potentially eligible for the OBBBA deduction) or business (deducted as a business expense) — never counted in both places.
Mixed use: the split
Many self-employed people use one vehicle for both a personal life and a business. In that case the interest is split by use. The business-use share follows the business-expense rules; the personal-use share is the only part that could feed the OBBBA car loan interest deduction — and even then only if the vehicle and loan meet all the eligibility tests .
Because that split is fact-specific and easy to get wrong, it's the classic case to run past a tax professional. Keep a genuine record of business versus personal miles rather than guessing after the fact.
Don't let software double-count it
If you file with tax software, be careful not to enter the loan both as a business vehicle expense and as a personal Schedule 1-A adjustment. Pick the correct bucket for each portion. See the notes on TurboTax and H&R Block for where the personal adjustment lives.
Frequently asked questions
I'm a sole proprietor — can I take the OBBBA car loan interest deduction?
Yes, for the personal-use portion of a qualifying vehicle. The interest tied to business use is deducted as a business expense instead. You can't claim the same interest in both places.
My car is 100% business use. Do I use this deduction?
No. If the vehicle is entirely for business, its interest is a business expense, not the personal OBBBA deduction. The OBBBA deduction is specifically for personal-use vehicles.
How do I split interest between business and personal use?
Generally by your documented business-use percentage. Keep a real mileage or usage log; the business share goes to your business schedule and the personal share is the only part eligible for the Schedule 1-A deduction. This split is worth confirming with a tax professional.
Does the vehicle still need to be US-assembled and new?
Yes — the personal-use OBBBA deduction always requires a new, personal-use, US-assembled vehicle financed with a 2025–2028 loan. Check the VIN and estimate your deduction as usual.
This is general information, not tax advice. Business-versus-personal allocation is fact-specific — a self-employed return with mixed use should be reviewed by a tax professional. Figures reflect the OBBBA car loan interest deduction for tax years 2025-2028.
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