Yes, you can sometimes claim interest on a car loan, but it depends on how the car is used and which tax rules you fall under.

Key point: personal vs business use

  • For a purely personal car , car loan interest generally has not been deductible in past years, similar to how most personal interest (like credit cards) is treated.
  • If you are self‑employed or a business owner and use the car for business, you may typically deduct the business‑use portion of the interest as a business expense (for example on Schedule C, or a corporate/partnership return).
  • Only the business‑use percentage of your interest is deductible.
    • Example: If the car is used 60% for business, you may deduct about 60% of the annual interest, assuming you properly track mileage and meet other requirements.

Newer rules for 2025 and after

Recent U.S. tax changes created a specific federal deduction for car loan interest on certain new personal vehicles, often discussed in connection with the “One Big Beautiful Bill Act” and related working‑families tax legislation.

Typical features described in public guidance and commentary include:

  • Deduction of up to about $10,000 per year of interest for qualifying new auto loans started in the mid‑2020s window (for example, loans originated after the end of 2024 and before a future cutoff year).
  • The vehicle generally must be:
    • A new passenger vehicle (not used),
    • Under a certain weight limit (light-duty car/SUV/pickup), and
    • Used as a personal vehicle; business vehicles are usually handled under normal business‑expense rules instead.
  • The deduction often phases out at higher incomes , so higher earners may get a reduced or no benefit.

Because these rules are new and somewhat complex, there is active discussion and clarification in tax articles and guidance on how they interact with long‑standing business‑use rules.

Practical steps if you think you qualify

  • Check your use :
    • Mainly personal use of a qualifying new car → look at whether you fall under the new personal‑vehicle interest deduction rules for your tax year.
* Self‑employed / small‑business use → focus on regular business‑expense deduction rules (mileage vs actual expenses, including interest).
  • Track details :
    • Keep loan statements showing yearly interest.
    • Keep a mileage log if any business use is involved.
  • Use the right form :
    • Business owners typically claim car‑related interest as part of their business expenses.
    • The new personal‑car interest deduction is generally claimed on a specific schedule/form added to the individual income tax return under the recent law.

Important caveats

  • Rules can differ by country and even by state or province, and many online discussions focus on U.S. federal taxes during 2025–2028.
  • Even within the U.S., there are income limits, vehicle‑eligibility tests, and timing rules for when the loan started and when interest was paid.
  • Because this is a significant deduction and the rules are evolving, tax writers and advisors strongly recommend confirming your exact situation with a qualified tax professional before filing.

Simple rule of thumb

  • Personal car, old rules only? Probably no deduction.
  • Self‑employed / business car? Often yes , at least proportionally, if you document your business use.
  • New personal car bought under the 2025‑era law window? You may be able to claim up to a capped amount of interest each year if you meet the new law’s conditions.

TL;DR: You cannot freely claim interest on every car loan, but you often can if the car is used for business, and there is now a special, capped deduction for interest on certain new personal auto loans in the mid‑2020s, subject to income and vehicle rules.

Information gathered from public forums or data available on the internet and portrayed here.