Where to enter it: Schedule 1-A, Part IV
The car loan interest deduction lives in Part IV of Schedule 1-A, the form for "additional deductions". It is four pieces of information and eight lines of arithmetic - and the VIN is mandatory.
The VIN box: line 22
Line 22 is where you report the vehicle. No VIN, no deduction: the statute only allows the deduction if the identification number of the vehicle is included on the return. If you financed two qualifying vehicles, both VINs go there.
Your VIN is on the driver's side of the windshield, on the driver's door jamb, on your registration, and on your loan documents. It is 17 characters, and it never contains I, O or Q.
The arithmetic: lines 23 to 30
| Line | What you do |
|---|---|
| 23 | Enter the interest you paid during the tax year on all qualifying vehicle loans. |
| 24 | Enter the smaller of line 23 or $10,000. This is the annual cap - one cap per return, not per loan. |
| 25 | Enter your modified adjusted gross income for the year. |
| 26 | Enter $200,000 if you are married filing jointly, otherwise $100,000. |
| 27 | Subtract line 26 from line 25. If zero or less, enter -0-. |
| 28 | Divide line 27 by $1,000 and round up to a whole number (1.5 becomes 2, and 0.05 becomes 1). |
| 29 | Multiply line 28 by $200. |
| 30 | Subtract line 29 from line 24. This is your deduction. |
Three worked examples
| Situation | Interest | Filing status / MAGI | Line 24 | Line 28 × $200 | Deduction |
|---|---|---|---|---|---|
| Below the threshold | $1,981.06 | Single, $85,000 | $1,981.06 | $0 (no excess) | $1,981.06 |
| Just over the threshold | $1,981.06 | Single, $104,500 | $1,981.06 | 5 × $200 = $1,000 | $981.06 |
| Cap and phase-out together | $12,000.00 | Single, $120,000 | $10,000.00 | 20 × $200 = $4,000 | $6,000.00 |
Note the third row: the cap bites first ($12,000 becomes $10,000) and then the phase-out comes off the capped figure. And in the second row, $4,500 over the threshold is five steps, not four and a half - the "or part of $1,000" rule.
How the number reaches your return
Schedule 1-A, Part IV produces one figure on line 30. That figure is carried through to your Form 1040 as an additional deduction, along with any other Schedule 1-A items you claim. Because it is below-the-line, it reduces your taxable income - it does not change your adjusted gross income, and you do not need to itemise to get it.
Mistakes to avoid
- Forgetting the VIN. The most expensive mistake, because the deduction is disallowed outright.
- Using the model year. The rules key on the loan date and the vehicle, not on the model year.
- Claiming interest from a lease. Lease payments are not interest on indebtedness.
- Applying the cap per loan. It is $10,000 per return, per year.
- Rounding down at line 28. Any fraction rounds up.
- Deducting interest paid after 2028. The window closes with tax year 2028.
Common questions
Do I have to report the VIN?
Yes. The statute says no deduction is allowed unless the VIN of the vehicle is included on the return - Schedule 1-A, Part IV, line 22. A return without it will not get the deduction, even if everything else is correct.
Can I claim it if I take the standard deduction?
Yes. Schedule 1-A collects "additional deductions" that are available whether or not you itemise. It is not part of Schedule A.
Does the deduction lower my AGI?
No. It is a below-the-line deduction: it reduces taxable income, not adjusted gross income. That matters if something else in your return is keyed to AGI.
I have two qualifying car loans. Do I get two $10,000 caps?
No. The $10,000 cap applies to the total qualifying interest on the return for the year, so two loans share one cap. Add the interest together, then cap it.
What about a joint return where only one spouse bought the car?
The interest is aggregated on the return and the $200,000 threshold applies on a joint return, so it is often better for a married couple to file jointly if one of them has a qualifying car loan.
Sources for this guide
- IRS Schedule 1-A (Form 1040), Part IV "No Tax on Car Loan Interest", lines 22-30, and the IRS explainer for Schedule 1-A — accessed 2026-10-07.
- IRC §163(h)(4), added by the One Big Beautiful Bill Act of 2025, Pub. L. 119-21, §70203 (the car loan interest deduction) — accessed 2026-10-07.
- T.D. 10054, final regulations under 26 CFR §1.163-16 and §1.6050AA-1, 91 FR (September 8, 2026); effective November 9, 2026 — 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.