Car Loan Interest Deduction
Deduct interest on loans for US-manufactured vehicles up to $10,000 under the OBBB Act.
Requirements
To qualify for the OBBB car loan interest deduction, your vehicle must meet these requirements:
✅ Vehicle Requirements
- US-manufactured - Built in United States
- MSRP ≤ $100,000 - Original sticker price limit
- Personal use - Not business vehicles
- Financed purchase - Must have loan interest
📋 Income Limits
- Single/MFS/HoH: Phase-out starts at $100,000
- Married Filing Jointly: Phase-out starts at $200,000
- Phase-out rate: $200 per $1,000 over limit
- Interest cap: $10,000 maximum deduction
What Counts as "US-Manufactured"?
✅ Qualifying Brands/Models (Examples)
Ford
F-150, Mustang, Explorer
Chevrolet
Silverado, Corvette, Tahoe
Cadillac
Escalade, CT4, CT5
Jeep
Wrangler, Grand Cherokee
Tesla
Model 3, Model Y (US-built)
BMW
X3, X4, X5, X6 (US-built)
❌ Non-Qualifying Examples
Vehicles manufactured in Mexico, Canada, Japan, Germany, or other countries - even if sold by US brands. Check your vehicle's VIN or window sticker for manufacturing location.
💡 How to Check: Look for "Made in USA" or "Assembled in USA" on your vehicle's window sticker or check the VIN decoder on the manufacturer's website.
Calculation Examples
Example 1: Qualifying Deduction
• Vehicle: 2024 Ford F-150 (US-made, $65,000 MSRP)
• Annual loan interest paid: $3,200
• Taxpayer MAGI: $85,000 (single)
Deduction: $3,200 (full amount, under cap and phase-out)
Tax Savings: $3,200 × 22% = $704
Example 2: With Phase-out
• Vehicle: 2024 Jeep Grand Cherokee (US-made, $75,000 MSRP)
• Annual loan interest paid: $4,800
• Taxpayer MAGI: $120,000 (single)
Phase-out reduction: ($120,000 - $100,000) ÷ $1,000 × $200 = $4,000
Final deduction: $4,800 - $4,000 = $800
How to Claim the Deduction
Step 1: Gather Documentation
- Loan statements showing interest paid
- Vehicle purchase agreement or title
- Window sticker showing "Made in USA" or VIN decoder results
- Form 1098 from lender (if provided)
Step 2: Verify Qualifications
- Confirm vehicle was manufactured in the United States
- Verify original MSRP was $100,000 or less
- Calculate your MAGI for phase-out purposes
Step 3: Complete Schedule 1-A
Enter your qualifying auto loan interest on Line 3 of Schedule 1-A.
Step 4: Apply Limits
- Cap deduction at $10,000
- Apply income phase-out if applicable
- Transfer final amount to Schedule 1, then Form 1040
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