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Worth $616 on a typical new car — not $10,000. Here's your real number.
For the first time since the 1980s, personal car loan interest is deductible — up to $10,000 a year through 2028, no itemizing required. But the headline lies by omission: a typical $40,000 loan at 7.5% only accrues about $2,800 of interest in year one, the deduction is worth your marginal rate (not the interest itself), the vehicle must be new AND finally assembled in the US, and the whole thing phases out between $100,000 and $150,000 of income. This calculator amortizes your actual loan, applies the cap and phase-out, and shows the real dollars.
New-car buyers use it to shrink the "$10,000 deduction" headline to their real number — first-year interest on a typical loan is ~$2,800, worth a few hundred dollars at their bracket — and to check the three gates (new, US-assembled, under the MAGI phase-out) before counting it.
Deductible interest × your marginal tax rate. A $40,000 loan at 7.5% over 60 months accrues ~$2,768 of first-year interest — worth about $616 at the 22% bracket, $332 at 12%. Over a full 5-year loan within the 2025–2028 window, the lifetime benefit is roughly $1,700 at 22%. Real money, but never a reason to finance a car you'd otherwise pay cash for.
New (original use starts with you), personal-use cars, SUVs, minivans, pickups, and motorcycles under 14,000 lbs GVWR, with FINAL ASSEMBLY in the United States — brand doesn't matter; some Toyotas qualify and some Fords don't. Check the window sticker's assembly point or decode the VIN with NHTSA's free tool. Used vehicles and leases are excluded, and the loan must have originated after December 31, 2024.
The deduction shrinks $200 for every $1,000 of MAGI over $100,000 (single/head of household) or $200,000 (joint) — fully gone at $150,000/$250,000. It's claimed on Schedule 1-A with the vehicle's VIN, works with the standard deduction, and expires after 2028 even if your loan runs longer.