Short answer. Start with the 17-character VIN. Run it through the NHTSA VIN Decoder to see the plant of manufacture, or read the final assembly point on the window sticker label. Then check the rest: a new vehicle (not used, not leased), a loan taken out after December 31, 2024 to buy it and secured by a first lien, a car, minivan, van, SUV, pickup or motorcycle under 14,000 pounds, and personal use expected more than half the time. The deduction is up to $10,000 a year for 2025 through 2028, and the VIN goes on your return each year you claim it.
The rules in one place
The IRS summary and Tax Tip 2026-79 (November 3, 2026) list these conditions for qualified passenger vehicle loan interest:
- The vehicle is new. Used vehicles do not qualify.
- It is a car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds.
- It underwent final assembly in the United States.
- The loan was originated after December 31, 2024, used to buy the vehicle for personal use, and secured by a lien on it. Leases are not eligible.
- The deduction is up to $10,000 a year and phases out above $100,000 of modified AGI ($200,000 on a joint return).
- You must include the VIN on your return for any year you claim it.
The final regulations, T.D. 10054, take effect November 9, 2026 and fill in details used below.
Step by step
- Find the VIN. It is on your registration, title, insurance card and loan contract, and on the vehicle itself. Copy all 17 characters and check them twice; the same VIN has to be on your return.
- Decode it. Enter the VIN in the NHTSA VIN Decoder, which the IRS links to for checking assembly location. Look for the plant information. The final regulations say the plant of manufacture reported in the VIN can establish US final assembly, and call this "one non-exclusive option."
- Or read the window sticker. The label attached at the dealership lists a final assembly point. The regulations accept that label as another way to establish it. Keep a photo of the sticker with your purchase papers.
- Confirm the car was new to you. Under the final regulations, original use generally starts with the first person who takes delivery after the vehicle is sold, registered or titled. A dealer's demonstrator held mainly for sale can still be new to its first buyer; a dealer's service loaner generally can't. For a financed purchase, the loan papers have to treat the vehicle as new.
- Check the loan papers. Look for the origination date (after December 31, 2024), that the loan paid for this vehicle, and that the lender holds a first lien, meaning the first voluntary security interest recorded against it. Debt for negative equity rolled in from a trade-in is not debt to buy the new vehicle, and items such as insurance financed with the car are excluded.
- Think about use when you borrowed. The test is whether you expected personal use more than 50% of the time when the debt was incurred. The regulations don't require you to split the interest between personal and business use.
- Collect the lender's statement. Lenders that receive $600 or more of interest on one of these loans in a year must report it. The IRS has a draft Form 1098-VLI, Vehicle Loan Interest Statement, with boxes for the VIN, the origination date, whether original use began with you and whether final assembly was in the United States.
Two buyers, same model
Two neighbors each financed the same model of pickup in 2026.
- Buyer A bought from a dealer in February 2026. The decoder shows a plant in the United States, the window sticker's final assembly point matches, the gross vehicle weight rating is 7,000 pounds, and the truck is for family use. Interest paid in 2026: $2,340. Modified AGI on a single return: $105,000, which is $5,000 over $100,000. At $200 for each $1,000 over, the reduction is $1,000, leaving an estimate of $1,340.
- Buyer B bought a truck of the same model from a different dealer's lot. The VIN decodes to a plant outside the United States, and the sticker agrees. The model name is the same, but this vehicle's final assembly was not in the United States, so its interest doesn't fit the rule.
Buyer A also rolled $3,000 of negative equity from an old car into the loan. The regulations treat that part of the debt as not incurred to buy the new truck, so Buyer A asks the lender how the interest on it was handled on the statement and keeps the answer with the loan papers.
Refinancing and other changes
If a qualifying loan is later refinanced, interest on the refinanced amount is generally eligible, but only up to the amount of the old loan that was refinanced. Accrued unpaid interest rolled into the new loan may qualify if the other requirements are met. Adding a new borrower when you refinance doesn't make the loan qualify for that person.
Keep this folder
- Bill of sale and the retail installment contract or loan agreement.
- A photo of the window sticker and a printout of the VIN decoder result.
- Registration and title showing the lien.
- The lender's year-end interest statement for each year you claim the deduction.
Official sources
- IRS: Working Families Tax Cuts provisions for individuals and workers (updated Aug. 27, 2026)
- IRS Tax Tip 2026-79: Purchasing a new vehicle? Car loan interest could be eligible for a tax deduction (Nov. 3, 2026)
- IRS Internal Revenue Bulletin 2026-39, T.D. 10054: final regulations on qualified passenger vehicle loan interest
- IRS: Form 1098-VLI, Vehicle Loan Interest Statement (draft, December 2026)
- IRS FS-2026-04: Schedule 1-A, Additional Deductions, what to know about the new form
- NHTSA VIN Decoder (linked by the IRS for checking assembly location)
Checked November 2026 on irs.gov and nj.gov.
Common questions
Does a used car qualify for the car loan interest deduction?
No. The IRS says the vehicle must be new and that used vehicles do not qualify.
Can I deduct interest on a lease?
No. Lease payments are not eligible.
How do I prove final assembly was in the United States?
The final regulations accept the plant of manufacture reported in the VIN, which the NHTSA VIN Decoder shows, or the final assembly point on the vehicle's label. Keep a copy of whichever you rely on.
What if I refinanced my car loan?
Interest on the refinanced loan is generally eligible, but only to the extent the new loan doesn't exceed the amount refinanced.
I sometimes use the car for work. Does that rule it out?
The test is whether you expected personal use more than 50% of the time when you took out the loan. The regulations don't require splitting the interest between personal and business use.
Do I have to itemize to claim it?
No. It is claimed on Schedule 1-A, which is used whether or not you itemize. On the 2025 Form 1040, the Schedule 1-A total goes on line 13b.
Related guides: Tax documents checklist for 2027