How to check a car loan qualifies for the interest deduction

The new federal deduction for car loan interest is real, but plenty of loans signed this fall will not qualify. People usually assume any car loan counts. It does not. The car has to be new, assembled in the United States, and bought with a loan, not a lease. Check all of it on the lot, before you sign, because nothing can be fixed after the paperwork is done.

Confirm the car is new and for personal use

The deduction covers interest on a loan for a vehicle whose original use starts with you. Used cars do not qualify, and neither does a car bought for business or commercial use. It must be a car, minivan, van, SUV, pickup or motorcycle with a gross vehicle weight rating under 14,000 pounds, as of October 2026.

Check where the car had its final assembly

Look at the vehicle information label on the window at the dealer. It lists the final assembly location. To double check, copy the 17 character VIN, open the NHTSA VIN decoder, paste the VIN, run the search, and scroll to Plant Information at the bottom of the results. The plant country must be the United States. The IRS lets you rely on either source. Two versions of the same model can come from different plants, so check the exact car you are buying, not the model.

Finance it with a loan secured by the car

The loan must start after December 31, 2024, be used to buy the car, and be secured by a lien on the car. Lease payments do not qualify, even with a buyout later. If you refinance a qualifying loan later, interest on the refinanced amount is generally still eligible.

Check the income limit

The deduction is up to USD 10,000 of interest a year. It shrinks once modified adjusted gross income passes USD 100,000, or USD 200,000 for joint filers, and disappears entirely at higher incomes. You do not need to itemize to claim it.

Keep the records the return will ask for

Save the purchase contract, the window label or a screenshot of the decoder result, and the VIN. Your lender must send you a statement of the interest paid each year. You claim the deduction in Part IV of Schedule 1-A with your Form 1040, and the return asks for the VIN.

If you already signed. Run the VIN through the decoder now. If the car was assembled outside the United States, or the deal was a lease, the interest does not qualify, and no later paperwork changes that.

If the car is used. It does not qualify, even when it was assembled in the United States and the loan meets every other rule.

Sources. IRS: Working Families Tax Cuts deductions, no tax on car loan interest, IRS: what you will need to file under the new law, IRS: Schedule 1-A (Form 1040), IRS: Form 1040 instructions, Schedule 1-A Part IV, NHTSA VIN decoder.