IRS Finalizes New Car Loan Interest Deduction — Who Can Claim Up to $10,000

The IRS has finalized regulations for a temporary federal deduction allowing eligible taxpayers to deduct up to $10,000 a year in interest on loans used to buy qualifying new vehicles assembled in the United States. Zamrznuti tonovi/Shutterstock

Americans financing certain new vehicles can deduct up to $10,000 a year in car loan interest under a temporary federal tax break, and the IRS has now finalized regulations explaining who qualifies. The deduction was created by the One Big Beautiful Bill Act signed into law July 4, 2025, and applies to qualifying vehicle loans incurred after December 31, 2024. It is available for tax years 2025 through 2028 under current law.

One particularly important feature is that taxpayers don’t have to itemize deductions to claim it. Someone who takes the standard deduction may still qualify for the car loan interest deduction. But the $10,000 headline comes with several significant restrictions.