| Situation | Qualifies? |
| New car, US-assembled, financed in 2025 or later | Yes |
| Used car, any age or mileage | No |
| Certified pre-owned | No |
| Dealer demo with a few hundred miles, never titled | Usually yes |
| Lease | No |
| Lease-end buyout | No |
| Loan taken out in 2024 (or earlier) | No |
| Refinance of a qualifying loan | Yes, up to the old balance |
| Cash-out refinance amount above the old balance | No (that portion) |
| Negative equity rolled into the new loan | No (that portion) |
| Vehicle assembled in Mexico, Canada, Japan, Korea, Germany | No |
| Business or fleet vehicle (over 50% business use) | No |
| Motorcycle, new and US-assembled | Yes |
| RV / camper van on a van chassis under 14,000 lb | Yes |
| Towable camper, trailer, boat, ATV, golf cart | No |
| Personal loan, HELOC, or credit card used to buy the car | No |
| Loan from a relative | No |
| Married filing separately | No |
Used and certified pre-owned
The law says the vehicle's original use must begin with the taxpayer. That's the same language the IRS uses for other "new vehicle" rules, and it means exactly what it sounds like: you must be the first person to put it into service. A one-year-old car with 8,000 miles is used. A certified pre-owned car with a factory warranty is used. Treasury considered and rejected a "nearly new" exception.
The one gray area that comes out in your favor: dealer demonstrators. If a dealer used the car for test drives but held it for sale to customers, the regs say original use didn't begin with the dealer — so when you buy it, you're the first user. A car the dealership titled and used as a service loaner or company vehicle is different; that's a used car.
Leases and lease buyouts
Lease payments contain an implied finance charge, but it isn't "interest paid on indebtedness," so nothing about a lease is deductible. Buying the car at lease end doesn't rescue it either: the leasing company was the original user, so the vehicle fails the "new" test even though you're financing it for the first time.
If you're choosing between leasing and buying a new US-built car in 2026–2028, the deduction tilts the math toward buying — worth roughly $500–1,000 a year for a typical loan at typical incomes. Run the numbers.
The 2024 loan problem
The loan must have been originated after December 31, 2024. A 2025 model bought and financed in December 2024 gets nothing, for all four years. There's no workaround by refinancing: a refinance only qualifies if the loan it replaces qualified.
Refinancing
If your original loan qualified, you can refinance and keep deducting — but only interest on the amount that was refinanced (plus any accrued unpaid interest). Take cash out above the old balance, and the interest on that extra portion isn't deductible. The new loan must still be a first lien on the same vehicle. And a co-borrower added at the refinance doesn't get the deduction; it stays with the original buyer.
Negative equity, add-ons and what's in the loan
Interest on amounts financed for sales tax, registration, GAP insurance, an extended warranty, credit insurance and accessories is fine — they're part of the purchase. Interest on negative equity rolled over from your trade-in is not. Your lender's Form 1098-VLI reports total interest, so if part of your loan was negative equity, you'll need to prorate.
Business use
The deduction is for personal-use vehicles. The test is what you expected when you took out the loan: more than 50% personal use by you, your spouse or a relative. If you bought a truck primarily for your business, this deduction isn't for you — but the business-interest and depreciation rules on your Schedule C may be better anyway. The test is applied once, at origination; switching to more business use later doesn't undo it.
Vehicle types
Cars, minivans, vans, SUVs, pickups and motorcycles under 14,000 lb GVWR qualify. Towable campers, trailers and boats don't (they're not motor vehicles under the rule); ATVs, side-by-sides and golf carts don't either. A motorhome or camper van built on a van chassis under 14,000 lb can qualify — the regs say the living quarters don't disqualify it. Some heavy-duty dually pickups sit exactly at 14,000 lb, and the rule is less than 14,000, so check the door label.
How the loan itself has to look
It has to be a loan secured by a first lien on the vehicle, from a lender who isn't a relative or a related business. A personal loan, a home-equity line, or a credit card used to buy the car don't count, even if the car itself is perfect. Dealer financing, bank and credit-union auto loans, and manufacturer finance arms all work.
Income and filing status
The deduction shrinks by $200 for every $1,000 (or part of $1,000) of income over $100,000 ($200,000 joint) and disappears at $150,000 ($250,000). Married couples must file jointly. You need a valid Social Security number, and the VIN goes on your return.
Calculate your car loan interest deduction →
Frequently asked questions
Do used cars qualify?
No, including certified pre-owned. You must be the first user.
Do leases qualify?
No, and neither do lease-end buyouts.
I financed in December 2024. Anything I can do?
No. Loans must be originated after Dec 31, 2024, and refinancing a non-qualifying loan doesn't help.
Does a refinance keep the deduction?
Yes, up to the refinanced balance, if the original loan qualified.
Can I deduct interest on a car I use for DoorDash?
If you expected more than 50% personal use when you took the loan, yes. If it's primarily a business vehicle, no.
Does a credit union loan qualify?
Yes, as long as it's secured by a first lien on the vehicle.