Tax year 2026 · filing season 2027

Car loan interest deduction for 2026

Direct answer: The 2026 car loan interest deduction uses the same $10,000 cap and MAGI phase-out as 2025; claim it on Schedule 1-A when you file your 2026 return in 2027 (draft line numbers may still change).

Interest you pay in 2026 on a qualified new-vehicle loan is deducted on the 2026 return you file in 2027. That is the filing season this site is written for. IRS news release IR-2025-103 says the tax year 2026 inflation adjustments generally apply to tax returns filed in 2027. The statute did not change the $10,000 cap or the $100,000 / $200,000 MAGI thresholds for 2026. What changes is the paperwork: a draft schedule, and Form 1098-VLI in regular use.

Same deduction, later lines

The June 16, 2026 draft of Schedule 1-A is watermarked “DRAFT — DO NOT FILE.” Part IV on that draft is lines 28 through 36. Line 28 asks for the VIN and asks, for each vehicle, whether original use started with you or your spouse and whether final assembly was in the United States. A used vehicle does not qualify. Line 30 is the smaller of the qualified interest or $10,000. Line 32 is still $100,000, or $200,000 if married filing jointly. Line 34 still divides the excess by $1,000 and rounds up. Line 36 is the deduction. Line 44 is the schedule total, and the draft says to enter it on Form 1040, 1040-SR, or 1040-NR, line 13a.

Treat those line numbers as a preview. The IRS can renumber a draft before it releases the form you actually file. The Schedule 1-A guide puts the 2025 and draft 2026 lines side by side. The calculator uses the draft labels when the tax year is 2026, and the dollar math does not depend on the line numbers.

Form 1098-VLI arrives for 2026 interest

The draft caution says certain vehicle loan interest paid in 2026 should be reported to you on Form 1098-VLI, box 1. The December 2026 instructions for that form are written for calendar year 2026 and later years until a new revision is issued. A lender files when it receives $600 or more of interest on one specified passenger vehicle loan during the year in a trade or business. The $600 test is per loan, not per borrower. Interest under $600 can still be deductible if the loan qualifies; the form is the lender’s reporting rule, not a minimum for your deduction.

For 2025, Notice 2025-57 allowed a simpler statement. Do not expect that transition rule to cover 2026 interest. When the statement arrives, compare box 1 with your own records, read box 7 on final assembly, and leave out any part of the balance that was negative equity or cash-out. The 1098-VLI page lists the boxes.

2026 standard deduction, kept separate

Revenue Procedure 2025-32, section 4.14, sets the 2026 basic standard deduction at $32,200 for married filing jointly and surviving spouses, $16,100 for single filers and married filing separately, and $24,150 for heads of household. IR-2025-103 publishes the same figures. The additional amount for being 65 or blind is $1,650 if you are married, and $2,050 if you are unmarried and not a surviving spouse.

None of those standard-deduction amounts include car loan interest. You can claim the standard deduction and Schedule 1-A on the same return. The car-loan phase-out still looks at Schedule 1-A MAGI, not at taxable income after the standard deduction.

What to do before January

The busy months for individual returns are January through April. Before that season, the useful records are the VIN, the contract date, the final-assembly label or the NHTSA plant country, and a year-to-date interest figure that excludes negative equity. If you have more than one qualified loan, add them before you apply the single $10,000 cap. If your MAGI will land near $100,000, or $200,000 on a joint return, run the MAGI helper. A few dollars over a $1,000 block rounds up and costs $200 of deduction.

Estimate a 2026 deduction