TaxBreakCalc
2025–2028 Updated 2026-08-15

Car Loan Interest Deduction Calculator

You can deduct up to $10,000 of interest on a car loan, and you don’t have to itemize. Above $100,000 of modified AGI it doesn’t fade out smoothly. It drops in $200 steps, and one dollar can trigger a whole step.

Built and figure-checked by , Independent developer. Not a CPA or tax adviser.

$
$
Your tax savings
$264/yr
From a $1,200 deduction, not $1,200 off your bill
Interest paid$3,200
Statutory cap$10,000
Phase-out steps10
Allowed deduction$1,200
Bracket22%
Modified AGI is 10 steps past the threshold, and each step costs $200 of deduction.
A deduction lowers taxable income. It is worth its size times your rate.
Estimate only
How this estimate is built ›

The dollar that costs you $44

Most write-ups call this a phase-out, which makes it sound gradual. The statute says the deduction falls by $200 for each $1,000 or portion thereof of income above the threshold. Those three words turn a ramp into a staircase.

1.At $100,000 of modified AGI you keep the whole $10,000
2.At $100,001, one dollar more, you lose $200 of deduction
3.That single dollar costs $44 in tax at a 22% bracket
Averaged across a full $1,000 step the deduction falls at 20 cents on the dollar, so the real marginal rate inside the band is 26.4% rather than 22%. The cliff itself is sharper than any average suggests, because the step lands on whichever dollar happens to cross the boundary.

Those figures are our own arithmetic on the reduction in 26 U.S.C. 163(h)(4). The IRS publishes the thresholds, not the step behaviour.

Where the deduction actually reaches zero

Read the reduction as a smooth ramp and $10,000 divided by $200 gives 50 steps, which lands the end of the band at $150,000 single. That is the figure most summaries print. Counting whole steps the way the statute does moves it.

Filing statusPhase-out startsSmooth readingWhat the statute gives
Single$100,000$150,000$149,001
Joint$200,000$250,000$249,001

At exactly $149,000 the excess is 49 whole steps, so $200 of deduction still survives. It takes one more dollar to trigger the fiftieth step.

Every step of the phase-out

Each row is the first dollar of income that triggers that step, which is the moment the deduction actually drops. Scroll the table, or use the calculator above for your number.

Modified AGI Step Deduction allowed Tax saved at 22%
$100,000 0 $10,000 $2,200
$100,001 1 $9,800 $2,156
$101,001 2 $9,600 $2,112
$102,001 3 $9,400 $2,068
$103,001 4 $9,200 $2,024
$104,001 5 $9,000 $1,980
$105,001 6 $8,800 $1,936
$106,001 7 $8,600 $1,892
$107,001 8 $8,400 $1,848
$108,001 9 $8,200 $1,804
$109,001 10 $8,000 $1,760
$110,001 11 $7,800 $1,716
$111,001 12 $7,600 $1,672
$112,001 13 $7,400 $1,628
$113,001 14 $7,200 $1,584
$114,001 15 $7,000 $1,540
$115,001 16 $6,800 $1,496
$116,001 17 $6,600 $1,452
$117,001 18 $6,400 $1,408
$118,001 19 $6,200 $1,364
$119,001 20 $6,000 $1,320
$120,001 21 $5,800 $1,276
$121,001 22 $5,600 $1,232
$122,001 23 $5,400 $1,188
$123,001 24 $5,200 $1,144
$124,001 25 $5,000 $1,100
$125,001 26 $4,800 $1,056
$126,001 27 $4,600 $1,012
$127,001 28 $4,400 $968
$128,001 29 $4,200 $924
$129,001 30 $4,000 $880
$130,001 31 $3,800 $836
$131,001 32 $3,600 $792
$132,001 33 $3,400 $748
$133,001 34 $3,200 $704
$134,001 35 $3,000 $660
$135,001 36 $2,800 $616
$136,001 37 $2,600 $572
$137,001 38 $2,400 $528
$138,001 39 $2,200 $484
$139,001 40 $2,000 $440
$140,001 41 $1,800 $396
$141,001 42 $1,600 $352
$142,001 43 $1,400 $308
$143,001 44 $1,200 $264
$144,001 45 $1,000 $220
$145,001 46 $800 $176
$146,001 47 $600 $132
$147,001 48 $400 $88
$148,001 49 $200 $44
$149,001 50 $0 $0

51 rows, one per $200 step, from $100,000 to $149,001.

Whether your car qualifies

The income test is the easy part. Four vehicle tests decide whether there is anything to claim at all, and the first one rules out most buyers.

Qualifies
A car, minivan, van, SUV, pickup or motorcycle you are the original user of, with final assembly in the United States, a gross vehicle weight rating under 14,000 pounds, bought for personal use on a loan secured by the vehicle.
Does not qualify
Any used vehicle, since the statute wants the original user. Also lease financing, a refinance of debt you already had, fleet and commercial sales, salvage titles, vehicles bought for scrap or parts, and a loan from someone related to you.
Final assembly is a fact about the individual vehicle, not the brand. Two cars wearing the same badge can land on different sides of this test, so check the VIN rather than the marque. You have to put that VIN on the return anyway.

How your deduction is calculated

1.start = min(car loan interest you paid, $10,000 cap)
2.steps = modified AGI above the threshold, divided by $1,000, rounded UP
3.allowed = start − ($200 × steps), never below zero
4.your savings = allowed × your tax bracket
Rounding up in step 2 is the whole point. It is what the words “or portion thereof” do in 26 U.S.C. 163(h)(4), and it is why the deduction ends at $149,001 single rather than $150,000. The full cap at 22% is worth $2,200.

Where these numbers come from

Code recomputes every figure on this page from these sources at build time. Nothing is typed into the copy by hand. Read them yourself.

Ready to file? Compare tax software

You computed your deduction. These handle the new car loan interest line and the VIN entry.

TurboTax
Walks the new car loan interest line and the VIN entry.
FreeTaxUSA
Free federal e-file, OBBBA deductions included.
TaxSlayer
Tiered plans covering the new Schedule 1-A deductions.

Affiliate disclosure: we may earn a commission at no cost to you.

Other breaks you might qualify for

$12,500 / $25,000 MFJ

No Tax on Overtime

See how much federal income tax you save on your overtime pay.

 $25,000 per return

No Tax on Tips

Up to $25,000 of qualified tips, deducted from your income.

 $2,200 / child

Child Tax Credit

$2,200 per qualifying child, permanent and inflation-indexed.

Estimates only, not tax advice. Figures are the ones in 26 U.S.C. 163(h)(4), a $10,000 cap cut by $200 for every $1,000 or part of $1,000 of modified AGI above $100,000 single and $200,000 joint. A deduction lowers taxable income, so it is worth its size times your marginal rate rather than a dollar off your bill. State tax is not modelled, and whether a particular vehicle qualifies depends on its final assembly point and title. Check with a tax professional or your software before you file.