Page 1: What Is the Car Loan Interest Deduction?
If you’re buying a car this year, there’s good news. You may be able to deduct car loan interest on U.S.-built vehicles when you file your taxes. In 2025, this deduction can save you up to $10,000 per year if you qualify.
What is the deduction?
The U.S. government now allows taxpayers to deduct car loan interest if the vehicle was assembled in the United States and used for work, commuting, or business. This tax break encourages people to buy American-built vehicles while reducing the cost of borrowing.
To qualify, the car must:
- Be built in the U.S. (not just sold by an American brand)
- Be used at least partly for business or work
- Be financed with a loan that charges interest
This deduction doesn’t apply to personal use only, so using the car for rideshare driving, deliveries, or self-employment helps you qualify.
By choosing a U.S.-made car and using it for qualifying activities, you could deduct car loan interest and reduce your taxable income.
Page 2: How the Deduction Works in Detail
Let’s look at how the deduction works step-by-step.
1. What counts as loan interest?
When you borrow money to buy a car, the lender charges you a fee—called interest. Each month, part of your payment goes toward this interest.
2. How much can you deduct?
You can deduct car loan interest up to $10,000 per year. For example, if you paid $9,200 in interest in 2025, you can subtract that amount from your taxable income.
3. What forms do you need?
To take this deduction, you must itemize your taxes instead of taking the standard deduction. That means using:
- A statement from your lender showing the total interest paid
- Documentation proving the car was built in the U.S.
- IRS forms such as Schedule C or Form 2106, depending on your job
4. Can part-time business use qualify?
Yes! If you use your car even part-time for business, such as driving for Uber or delivering packages, you can deduct car loan interest for that portion of the use.
This deduction is a big help for many drivers in 2025, especially when vehicles are more expensive than ever.
Page 3: Tips to Qualify and Save the Most in 2025
To take full advantage of this deduction, follow these tips:
1. Choose the Right Car
Not all American brands qualify. Check if the vehicle was actually assembled in the United States. You can look up the VIN to confirm.
2. Keep Good Records
Save your loan documents, mileage logs, and receipts. These will help you prove both your business use and how much interest you paid.
3. Use the Car for Work
Even using the car for part-time work helps. If you deliver food, work for yourself, or use the car to visit clients, that use can count.
4. Ask a Tax Expert
Tax rules can be tricky. A tax professional can help you correctly deduct car loan interest and get the most from your return.
5. File the Right Way
You must itemize your deductions to use this benefit. If your itemized deductions are higher than the standard amount, you’ll likely come out ahead.
In summary, the ability to deduct car loan interest for U.S.-made vehicles up to $10,000/year is one of the best new tax benefits in 2025. If you need a car and plan to finance it, choosing a U.S.-built model can pay off at tax time.
