If you are planning on borrowing to purchase a new passenger vehicle in the next few years (before 2029), or have already purchased one in 2025, you should know that, for tax years 2025 through 2028, individuals can take a deduction  for the interest  paid on specified “qualified passenger vehicle loans,” up to a maximum deduction  of $10,000 for the year, if the vehicle is purchased for personal use (business or commercial use won't qualify) and certain other eligibility criteria are met.

The deduction  is taken “above the line.” In other words, it's subtracted from gross income to determine adjusted gross income (AGI), and thus is available to taxpayers whether they claim the standard deduction  or itemize. But, the deduction  is phased out for taxpayers whose modified adjusted gross income (MAGI) exceeds $100,000 ($200,000 for joint filers).

To qualify for the deduction, the interest  must be paid on a loan  that's originated after 2024 and before 2029, and that's used to purchase a vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify). A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone “final assembly in the U.S.” The Vehicle Identification Number (VIN) of the qualified vehicle must be included on the tax return for any year in which the deduction  is claimed.  And, if a qualifying vehicle loan  is later refinanced, interest  paid on the refinanced amount is generally eligible for the qualified passenger vehicle loan interest deduction.

You can claim the deduction  for interest  paid annually, as long as the loan  was originated between January 1, 2025, and December 31, 2028, and other eligibility requirements are met each year. So, for example, if you get a five-year loan  for an eligible vehicle in 2025, you may be able to deduct  interest  you pay each year from 2025 through 2028.