Car Loan Interest Deduction Calculator (2026–2027)

Under the One Big Beautiful Bill Act, taxpayers financing a qualified personal passenger vehicle can deduct up to $2,500 of auto loan interest above-the-line without needing to itemize.

directions_car Auto Loan Details

Above-The-Line

Filing Status

Annual Auto Loan Interest Paid $1,450

Found on Form 1098 or your lender's annual interest summary.

Modified Adjusted Gross Income (MAGI) $78,000

Tax Savings Form 1040 Schedule 1

Estimated Annual Federal Tax Savings

Direct tax reduction without itemizing

Annual Interest Paid: $0

Statutory Cap: $2,500

Eligible Deduction: $0

Deduction equals lesser of actual interest paid or $2,500 statutory cap, reduced by any phaseout percentage.

share Share This Calculation

policy Qualified Passenger Vehicle Interest Regulations IRS Statutory Citation

The vehicle must be a passenger automobile, light truck, or SUV primarily for personal use under 14,000 lbs GVWR.

IRC § 163(h) • One Big Beautiful Bill Act Verify on IRS.gov open_in_new

Frequently Asked Questions

Who qualifies for the car loan interest deduction?

Individual taxpayers financing a qualified personal passenger vehicle for personal use under the One Big Beautiful Bill Act provisions.

What is the maximum car loan interest deduction?

The statutory cap is $2,500 in eligible vehicle loan interest per year.

Do I have to itemize deductions to claim this?

Under the statutory rules, qualified vehicle interest is designed as an above-the-line deduction, meaning taxpayers taking the standard deduction can still benefit.