MundoKit

Car loan interest deduction calculator

Enter qualifying interest and MAGI, then confirm the vehicle and loan conditions. Use the optional amortization helper if you need an estimate of interest paid during the selected year.

Inputs
$
AGI plus Form 2555 lines 45 and 50, excluded Puerto Rico income, and Form 4563 line 15. Include the foreign housing deduction.
$
Actual mode only. Exclude interest deducted elsewhere and interest on ineligible financed items.
Exactly 50% does not qualify. Count personal use by you, your spouse, your or your spouse’s child, grandchild, parent or sibling, and household members sharing your main home. Use in performing services as an employee counts; other business use (such as rideshare driving) and income-producing use do not.

Results

Estimated car-loan interest deduction
$0.00
Interest used in calculation
$4,000.00
Interest after annual cap, before phase-out
$4,000.00
Income-based reduction (floored deduction at zero)
$2,200.00
  • Deduction shown as zero until all eligibility conditions are confirmed. Unchecked items: Vehicle was new: its original use began with you; Final assembly was in the United States; Road-use car, minivan, van, SUV, pickup or motorcycle; at least 2 wheels; GVWR under 14,000 lb; You originated the purchase loan after December 31, 2024 (or a qualifying refinance of that loan); When the purchase loan was incurred, expected qualifying personal use exceeded 50%; Loan is secured by a first lien on this vehicle; Lender is not a related person; this is a purchase loan, not a lease; Purchase is not a fleet sale, salvage-title vehicle, or vehicle intended for scrap or parts; You can include the vehicle VIN on the tax return
  • The $10,000 cap is per return, including joint returns. Married filing separately can qualify, using the $100,000 income threshold.

Results update as you type. The share link stores your inputs after the # in the address, which is not sent to our server, but anyone you send it to can read them.

This is a general estimate for information only, not tax, legal or financial advice. Real rules have more conditions than a calculator can show, so check the official source below or a qualified professional for your situation.

How it works

For eligible loans in 2025–2028, Schedule 1-A Part IV caps qualifying interest at $10,000 per return. It then subtracts $200 for every $1,000 or part thereof of MAGI above $100,000 ($200,000 on a joint return).

Deduction = max(0, min(interest, $10,000) − $200 × ceil(max(0, MAGI − threshold) ÷ $1,000))

AGI plus Form 2555 lines 45 and 50, excluded Puerto Rico income, and Form 4563 line 15. Include the foreign housing deduction.

All eligibility boxes must be checked before a positive deduction is shown. This checklist covers ordinary personal purchases; unusual inherited-loan arrangements need separate review. Do not include interest already deducted elsewhere.

The helper uses the fixed-payment amortization formula described in Fannie Mae’s manual. With P as principal, r as annual rate ÷ 100 ÷ 12 and n as months:

Monthly payment = P × r ÷ (1 − (1 + r)^(−n)) At zero interest: monthly payment = P ÷ n Month’s interest = opening balance × r Closing balance = opening balance − (payment − interest)

The selected start month is the first payment month, after one full interest period. Sum the interest in payments falling in the selected calendar year. No intermediate monetary rounding is used; display values round to cents. The statutory income step always rounds up. Actual daily accrual, payment timing and lender rounding can differ. The helper accepts up to 600 months as a calculator safeguard.

Worked examples

A partial income step counts

A fully eligible single filer pays $4,000 interest with $110,001 MAGI. Excess income is $10,001: round 10.001 up to 11 steps. The reduction is $2,200 and the deduction is $1,800.

Add back the foreign housing deduction

A fully eligible single filer has $100,000 AGI plus exclusions and a $10,000 foreign housing deduction. MAGI is $110,000. With $4,000 qualifying interest, the reduction is $2,000 and the deduction is $2,000.

One payment in December

A $1,200 loan at 12% over 12 months with its first payment in December 2026 has estimated monthly payments of $106.62. Its one 2026 payment includes $12.00 interest. At $80,000 single MAGI with all conditions met, the estimated deduction is $12.00.

Frequently asked questions

Can used cars or leases qualify?
No. The vehicle’s original use must begin with you, and lease payments do not qualify. Final assembly must be in the United States.
Can married filing separately claim this deduction?
Yes, if otherwise eligible. The income threshold is $100,000, as for other non-joint returns. You can claim the deduction with either the standard deduction or itemized deductions.
Which vehicles qualify?
A qualifying road vehicle is a car, minivan, van, SUV, pickup truck or motorcycle, with at least two wheels and a gross vehicle weight rating below 14,000 pounds. Confirm all remaining checklist conditions too.
Does refinancing an older loan make it eligible?
Refinancing an ineligible pre-2025 purchase loan does not make it eligible. Refinancing an already qualifying loan can preserve eligibility, limited to its outstanding balance; the first lien must remain.
Can I deduct interest on negative equity or insurance?
Exclude interest attributable to rolled-in debt on a trade-in and unrelated items such as liability insurance. Use only the qualifying portion of interest or loan principal in this tool.
Is the deduction the same as my refund?
No. It reduces taxable income. The actual tax effect depends on the rest of your return. Keep lender records and report the vehicle VIN on the return.

Sources

Last reviewed 2026-11-14; next review due by 2027-01-15. The method is written out above so you can check our math.