By Patricia Brandstetter, senior specialist editor at Thomson Reuters

For nearly 40 years, personal car loan interest has been off-limits as a tax deduction. That changed with the One Big Beautiful Bill Act (P.L. 119‑21, 7/4/2025), which temporarily allows the deduction under IRC Sec. 163(h)(4). For tax years 2025-2028, up to $10,000 of “Qualified Passenger Vehicle Loan Interest” (vehicle loan interest) per year is deductible – whether you itemize or take the standard deduction. Eligibility depends on the loan origination date, your income, and the type of vehicle.

If you bought a “qualified passenger vehicle” (qualifying vehicle) with a “specified passenger vehicle loan” (qualifying loan) in 2025, now is the time to claim the vehicle loan interest deduction on your tax return (Form 1040). If you plan to buy a new vehicle, you still have time: the deduction is available for loans originated through December 31, 2028.

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