How To Write Off Your Car Loan Interest in 2026
If you’ve been hearing people say “the IRS finally made car loan interest deductible,” they’re actually talking about a new law that came out under the One Big Beautiful Bill Act (OBBB). And yes, this one is real, but it’s not as simple as just writing off your car payment like a business expense.
Starting with 2025 tax returns, there is now a temporary deduction that allows certain taxpayers to deduct up to $10,000 a year in interest paid on a qualified auto loan. The catch is that it only applies to new vehicles with loans that originated after December 31, 2024, and the vehicle has to meet specific requirements like having its final assembly in the United States and used for personal transportation. It also phases out once your income gets above certain thresholds, so higher earners may not get the full benefit or any benefit at all.
So what does this actually mean in plain English? If you’re buying a new car and financing it, you might get a tax break on the interest you are already paying anyway. If you are buying used, or if the car does not meet the rules, or your income is too high, then nothing changes for you. And if you’re using a vehicle for business, you still need to follow the normal business deduction rules, not this new personal-use deduction.
The bottom line is this: it is a real new deduction, but it is narrow, technical, and easy to misunderstand. Before you build any tax strategy around it, it is worth making sure you actually qualify.
If you want help figuring out whether your vehicle, loan, or tax situation qualifies under the new OBBB rules, contact Keeton Tax Law at 702-530-9707 and get a clear, straight answer before you file.
