Calculator
IRS Mid-Year Standard Mileage Rate Split Calculator (2026)
Calculate your split-year 2026 vehicle tax deduction (H1 at 72.5¢ vs H2 at 76¢ per mile) under IRS Announcement 2026-11.
Try it nowGuide & How-To
Determine your deductible auto loan interest under the OBBBA. Taxpayers can deduct up to $10,000 in interest paid annually on new passenger vehicle loans, provided the vehicle was assembled in the United States.
The U.S. final-assembly requirement
To qualify for this above-the-line interest deduction, the passenger vehicle must have undergone final assembly in the United States. You can verify this by checking the vehicle's VIN or the manufacturer window sticker (Monroney label).
Deduction caps and phase-outs
The maximum deductible amount is $10,000 in interest annually. The deduction phases out between $100,000 and $150,000 MAGI for Single and Head of Household filers, and between $200,000 and $250,000 MAGI for Married Filing Jointly.
Checking a car before you sign, in two minutes
The dealership will not do this for you reliably, so do it yourself before signing anything. Find the final-assembly line on the Monroney window sticker, it names the plant and country, or run the VIN through NHTSA's free online decoder. A first VIN character of 1, 4, or 5 indicates US assembly. Do not trust the badge: plenty of vehicles from foreign-headquartered brands are built in Alabama, Kentucky, and Ohio and qualify, while several nameplates from Detroit brands are assembled in Mexico, Canada, or overseas and do not. The same model can even split by trim or model year, so verify the exact vehicle in front of you. Two minutes with the sticker decides whether the loan carries up to four years of deductible interest or none, and it is the one input in this calculator you can still change while you are on the lot.
What the numbers actually mean for you
The plant decides, not the badge
A Honda Passport built in Alabama qualifies; a Buick Envision built in China does not, and neither does a Chevy Blazer assembled in Mexico. 'American brand' is marketing; 'final assembly point' is law, and it is written on every new car sold. Two places tell you the truth: the Monroney window sticker's final-assembly line, and the VIN, where a first character of 1, 4, or 5 means US assembly.
The same model can split both ways. Some trims of a vehicle are built stateside while others of the SAME nameplate come from a plant abroad, so check the specific car in front of you, not the model's reputation. NHTSA's free VIN decoder settles arguments in about ten seconds, and doing it BEFORE signing beats discovering the answer at filing time by a full year of interest.
Used cars, leases, and refis: the exclusion list
The deduction is for NEW vehicles only, a used one-year-old car with the right VIN still fails. Leases fail too: you are not paying loan interest, whatever the money factor resembles. Loans from before 2025 fail, and so do loans from a family member rather than a lender. Business-use vehicles do not need this deduction at all, their interest already deducts under Section 162 on Schedule C.
Refinancing sits in the narrow middle: refinance the qualifying loan on the same qualifying car and the deduction survives on the refinanced balance; roll extra cash out on top, and the excess portion's interest does not qualify. Keep both lenders' statements the year you switch, the IRS gets interest reporting from each and your numbers need to reconcile line for line.
The phase-out is the fastest in OBBBA
The cap collapses at $200 per $1,000 of MAGI above $100,000 single, twice the pace of the tips and overtime ramps, so the whole benefit is gone by $150,000. A single filer at $125,000 has only half the cap left, though with typical car-loan interest running $1,500-$3,000 a year the cap rarely binds before the ramp does.
The real trap is the year your income jumps: a bonus or a spouse returning to work can wipe out a deduction you took the loan expecting to have. Nothing to unwind, the loan stands, but budget the car on its price and rate, and treat the deduction as seasoning. A $462 annual saving does not justify a longer loan or a pricier trim; the interest you add always exceeds the tax you save at a 22% bracket.
Claiming it without itemizing, and without over-claiming
This is an above-the-line-style deduction available alongside your standard deduction, no Schedule A needed, which is what makes it usable by the households that actually finance cars. Your lender reports the interest; you claim the deductible slice against the VIN's eligibility.
The over-claim patterns the IRS will match against lender reporting: deducting the whole car payment instead of the interest line, deducting a spouse's non-qualifying vehicle on a joint return, and carrying the deduction past the 2028 sunset out of habit. All three are cheap flags, because Form 1098-style interest reporting plus the VIN database makes verification nearly automatic.
Finding the right interest number takes one document: lenders financing qualifying vehicles issue an annual interest statement, and the figure on it is the ceiling for your claim, not your own amortization estimate. On a typical $38,000 loan at 7% over 60 months, interest runs roughly $2,400 in year one, $1,900 in year two, $1,400 in year three, and keeps shrinking, so re-run this calculator each January with the new statement instead of reusing last year's number. Claiming a flat amount every year is exactly the pattern that stands out when the IRS lines your return up against what the lender reported.
How the auto interest deduction math works
For 2025 through 2028, OBBBA makes interest on a loan for a NEW, personal-use vehicle finally assembled in the United States deductible, up to $10,000 a year, without itemizing. Car loan interest has not been personally deductible since the Tax Reform Act of 1986, so this is the first bite in four decades.
The calculator applies the two gates, US final assembly and the income phase-out, then runs your MAGI through the 2026 brackets with and without the deductible interest. A 'no' on the assembly question zeroes everything, which is exactly how the IRS will treat it.
Calculation Steps:
- Confirm the vehicle qualifies: NEW (not used), personal-use, under 14,000 lbs, and its FINAL ASSEMBLY point is in the US. The loan must also originate after 31 December 2024.
- Enter the interest actually paid this year from your lender's statement, principal never counts.
- The deductible amount is capped at $10,000 and shrinks by $200 per $1,000 of MAGI above $100,000 (single) or $200,000 (joint), reaching zero at $150,000 / $250,000.
- Federal tax is computed on MAGI, then on MAGI minus the deduction; the gap is your saving.
Worked example
Luis finances a new $38,000 Tennessee-built SUV in January 2026 and pays $2,100 of interest in year one. Single, MAGI $85,000.
The truck's VIN starts with 1, final assembly Tennessee, loan originated 2026: qualified. His MAGI is below $100,000, so no phase-out.
At $85,000, the $16,100 standard deduction leaves $68,900 taxable, and the 2026 single brackets charge $9,870.
Tax on $82,900: taxable $66,800, tax $9,408.
Luis saves $462 this year. The saving fades with the loan: interest front-loads, so year five's deduction is a fraction of year one's, worth knowing before it gets priced into a dealership pitch as '$10,000 tax free'.
Input definitions
Review the glossary of terms used in the calculation model below. Click on highlighted links to read more in-depth definitions in our financial glossary:
| Parameter | Definition & Context |
|---|---|
| Annual Auto Interest Paid | Interest only, from the lender's annual statement. Principal, fees, insurance, and extended warranties are not interest. |
| Modified AGI | Total income. The phase-out runs $100,000-$150,000 single and $200,000-$250,000 joint, losing $200 of cap per $1,000 over. |
| US Final Assembly | Whether the vehicle's final assembly plant is in the United States. Brand nationality is irrelevant; the plant is everything. |
Built & Maintained
