How to claim the car loan interest deduction on your 2025 tax return (step by step)
You claim the car loan interest deduction on Schedule 1-A (Form 1040), Part IV, whether you itemize or take the standard deduction. In short: confirm the car and loan qualify, find the interest you paid in 2025, work out your MAGI, fill in lines 22-30 with your VIN, and carry the total to Form 1040, line 13b.
Step 1: Confirm the car and the loan qualify
Under IRC §163(h)(4) and the final regulations, the interest counts only if all of these are true (the IRS fact sheet has the same list):
- the loan was taken out after December 31, 2024 to buy the vehicle, and it is secured by a first lien on it;
- the vehicle is new - its original use started with you - so used and certified pre-owned vehicles do not count;
- it is a car, minivan, van, SUV, pickup truck or motorcycle with a GVWR under 14,000 lb;
- its final assembly was in the United States;
- you bought it for personal use, and it is not a lease, a fleet purchase, or a salvage or scrap vehicle.
Final assembly is the test people get wrong most often, because a US brand can be built abroad and a foreign brand can be built here. Check your VIN to see the plant country NHTSA reports, and read new vs used, leases and refinancing if any of those apply to you.
Step 2: Find the interest you paid in 2025
You deduct the interest you actually paid during 2025, not the interest scheduled over the life of the loan. For 2025, many lenders did not send a Form 1098-VLI: under Notice 2025-57 they could instead make the total available to you by January 31, 2026, for example in your online account or on a monthly or annual statement.
- Look for "interest paid" for 2025 in your lender's online account or year-end statement.
- If you cannot find it, add up the interest portions of the payments you made in 2025, or ask the lender.
- To estimate it from the loan terms, use the calculator.
- If you rolled negative equity from a trade-in into the loan, the interest on that part does not qualify. The eligibility traps guide shows how to split it.
From 2026 on, lenders that receive $600 or more send Form 1098-VLI by January 31.
Step 3: Work out your MAGI (Schedule 1-A, Part I)
The phase-out uses modified adjusted gross income from Schedule 1-A, Part I:
- Line 1: your adjusted gross income from Form 1040, line 11b.
- Lines 2a-2e: add back any excluded Puerto Rico income and the amounts from Form 2555 (lines 45 and 50) and Form 4563 (line 15). Most people have nothing here.
- Line 3: the total, which is your MAGI. For most people it equals their AGI.
Step 4: Fill in Schedule 1-A, Part IV (lines 22-30)
| Line | What to enter |
|---|---|
| 22a / 22b | One row per vehicle: (i) the VIN; (ii) any interest on that loan deducted on Schedule C, E or F; (iii) the qualifying interest for Schedule 1-A, which is the total paid in 2025 less column (ii). More than two vehicles: see the instructions. No VIN, no deduction. |
| 23 | Add column (iii) of lines 22a and 22b. |
| 24 | The smaller of line 23 or $10,000. |
| 25 | Your MAGI from line 3. |
| 26 | $100,000, or $200,000 if married filing jointly. |
| 27 | Line 25 minus line 26. If zero or less, enter the line 24 amount on line 30 and skip lines 28-29. |
| 28 | Line 27 divided by $1,000, rounded up to a whole number. |
| 29 | Line 28 times $200. |
| 30 | Line 24 minus line 29 (not below zero). This is your deduction. |
A single filer paid $3,000 of qualifying interest in 2025 and has MAGI of $112,500. Line 24 is $3,000. Line 27 is $12,500, so line 28 is 13 (12.5 rounded up) and line 29 is $2,600. Line 30 is $3,000 - $2,600 = $400. With MAGI of $100,000 or less, the full $3,000 would be deductible.
The calculator runs the same arithmetic, and the Schedule 1-A guide covers each line in more detail.
Step 5: Carry the total to Form 1040, line 13b
Part VI of Schedule 1-A adds line 30 to any other new deductions you claim on the schedule (tips, overtime and the enhanced deduction for seniors) on line 38. That total goes on Form 1040 or 1040-SR, line 13b, and you attach Schedule 1-A to your return (IRS FS-2026-04).
Step 6: Keep your records
You do not attach the lender statement, but keep these with your tax records:
- the lender's statement or year-end summary showing the 2025 interest;
- the purchase contract and loan agreement, which show the date, the lender's lien and any negative equity;
- proof of final assembly - the window sticker's final assembly point or a VIN decode (NHTSA's VIN decoder or ours);
- the door-jamb label showing the GVWR.
Step 7: Already filed? Amend with Form 1040-X
If you filed your 2025 return without the deduction, you can file an amended return on Form 1040-X with Schedule 1-A. Per the IRS, you generally have 3 years after the date you filed the original return, or 2 years after you paid the tax, whichever is later. If you filed early, count from the April deadline.
If you got an extension and have not filed yet, your 2025 return is due October 15, 2026. Claim the deduction on that return.
Common questions
Do I need a Form 1098-VLI to claim the deduction for 2025?
No. For 2025, IRS Notice 2025-57 let lenders skip the form and simply make the total interest you paid available - for example in your online account or on a monthly or annual statement. Use that figure.
Can I claim it if I take the standard deduction?
Yes. The deduction is claimed on Schedule 1-A, which you can use whether you itemize or take the standard deduction.
Where does the deduction go on Form 1040?
Schedule 1-A, Part IV ends at line 30. Part VI adds it to any other Schedule 1-A deductions on line 38, and that total goes on Form 1040 (or 1040-SR), line 13b. Attach Schedule 1-A to your return.
I already filed my 2025 return without it. Can I still claim it?
Yes, by filing an amended return on Form 1040-X with Schedule 1-A. To claim a refund you generally have 3 years from the date you filed the original return (counting from the April deadline if you filed early) or 2 years from when you paid the tax, whichever is later.
Is the $10,000 limit per car?
No. It is one cap per return: line 24 limits the total from all your qualifying loans to $10,000, before the income phase-out.
This guide explains the rules; it is not tax advice. Check the IRS instructions or ask a tax professional about your situation.
Sources for this guide
- IRC §163(h)(4), added by §70203 ("No tax on car loan interest") of the One Big Beautiful Bill Act (H.R. 1, 119th Congress), enacted as Pub. L. 119-21, 139 Stat. 176 - enacted text on Congress.gov — accessed 2026-10-07.
- T.D. 10054, final regulations under 26 CFR §1.163-16 and §1.6050AA-1, 91 FR 57214 (September 8, 2026); effective November 9, 2026 — accessed 2026-10-07.
- IRS Schedule 1-A (Form 1040), Part IV "No Tax on Car Loan Interest", lines 22-30 — accessed 2026-10-07.
- IRS Fact Sheet FS-2025-03, "No Tax on Car Loan Interest" - the $10,000 cap, the MAGI phase-out, qualifying vehicles, and how to confirm US final assembly from the window label or the VIN — accessed 2026-10-07.
- IRS Fact Sheet FS-2026-04, "Schedule 1-A, Additional Deductions: What to know about the new form" (Part IV, and claiming it whether or not you itemize) — accessed 2026-10-07.
- IRS Notice 2025-57, transition relief for 2025 car loan interest reporting — accessed 2026-10-07.
- IRS, "File an amended return" - Form 1040-X and the time limits for claiming a refund — accessed 2026-10-07.
- IRS, "Get an extension to file your tax return" - the October 15 extended deadline — accessed 2026-10-07.
We link to primary sources: the statute, the regulations, IRS forms and instructions, and NHTSA's own vehicle data. Where those sources do not settle a question, we say so rather than guess.