AUTO-LOAN INTEREST DEDUCTION

The One Big Beautiful Bill Act will allow car owners to deduct interest on qualifying personal-use car loans. You do not need to be self-employed to claim this deduction—and you don’t have to itemize either 

Can You Deduct Auto-Loan Interest? Here’s the Deal 

Auto loans are a common part of life—but did you know in some cases, the interest on your car loan may be tax-deductible? 
At Liberty Tax, we help clients understand when and how to take advantage of this often-overlooked deduction. 

What Is the Auto-Loan Interest Deduction? 

This deduction allows you to subtract qualified auto loan interest up to $10,000 from your taxable income each year. It’s considered an above-the-line deduction, meaning you don’t need to itemize to claim it.  

Who Qualifies for the Deduction? 

 You may be able to deduct car loan interest if: 

• You purchased a passenger vehicle (car, truck, SUV, van, or motorcycle) with a loan originated after December 31, 2024 secured by a lien on the vehicle. 
• You use the vehicle for personal purposes (not for Business or commercial use) 
• Your Modified Adjusted Gross Income (MAGI) is within limits 
• You report the vehicle’s VIN on your tax return 
• Your vehicle is new and assembled in the US  

MAGI Limits 

The deduction begins to phase out above $100,000 MAGI (Modified Adjusted Gross Income) for single for single filers (or $200,000 for joint filers) at $200 per $1,000 over the threshold. It phases out completely at $150,000 for single filers/$250,000 for joint filers. 

How to Claim the Deduction 

 If you qualify, you can deduct auto-loan interest on your tax return. 

Here is what you need to do: 

1. Retain auto loan documents showing the amount of interest paid 
2. Report the vehicle’s VIN when filing your tax return 
3. Determine whether you meet the MAGI limit 
4. Use your Form 1040 and claim the deduction above the line 
5. No itemizing required 
6. A Liberty Tax professional can walk you through the VIN compliance and confirm your eligibility before filing.  

Let Liberty Tax Help You Navigate the Details 

The auto-loan interest deduction is just one of many benefits available to taxpayers—but only if you qualify and file correctly.
At Liberty Tax, our professionals understand the nuances of deductions and will walk you through every step. 
Stop by your nearest Liberty Tax office or schedule an appointment online today. Let’s make sure your ride is working for your wallet this tax season. 

  

Disclaimer: This advertisement is for informational purposes only and does not constitute tax advice. Eligibility for the auto loan interest deduction and its impact on your tax return may vary. Not all automobiles qualify for the deduction. Each tax situation is unique. This is not a substitute for personalized tax, investment, legal, or business advice. To understand how these changes may affect your tax return, consult with a licensed professional who knows your personal or business circumstances. Taxpayer eligibility for deductions or credits may vary significantly. Actual eligibility and refund outcomes vary. This example is not a guarantee of specific tax results.