Those shopping for a new car or minivan may be eligible to deduct some of the interest on their vehicle loan, the Internal Revenue Service reminded taxpayers today.
In the November 3 tax tip, the IRS outlined the requirements for a federal deduction of up to $10,000 a year in qualifying car loan interest. The benefit is available to eligible taxpayers whether they itemize or take the standard deduction.
The deduction is for qualifying interest, not the vehicle’s purchase price or the full monthly payment. It is a deduction, not a $10,000 tax credit.
Not Every Vehicle Qualifies
Eligible vehicle types include cars, minivans, SUVs, pickup trucks and motorcycles. The vehicle must be new, have a gross vehicle weight rating below 14,000 pounds, and have undergone final assembly in the United States. Used vehicles and leases do not qualify.
For families comparing a purchase with a lease, that distinction matters: leasing a new minivan does not qualify for this deduction.
The IRS says buyers can check the vehicle’s information label at the dealership, use the vehicle identification number, or check the assembly location through the National Highway Traffic Safety Administration’s VIN Decod...