IRS Finalizes Rules On The New Car Loan Interest Deduction

The Treasury Department and IRS issued final regulations implementing the new deduction for qualified passenger vehicle loan interest (QPVLI), a temporary benefit created by the One, Big, Beautiful Bill Act (OBBBA) that allows individuals to deduct up to $10,000 of interest paid on certain auto loans, even if they do not itemize deductions. The final rules largely adopt the proposed regulations issued in January 2026 but include clarifications in response to public comments received by the Treasury Department.

The deduction applies to interest paid on indebtedness incurred in taxable years beginning after December 31, 2024 and before January 1, 2029. To qualify, the loan must be secured by a first lien on an “applicable passenger vehicle,” meaning a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle with a gross vehicle weight rating under 14,000 pounds, whose original use commences with the taxpayer, and whose final assembly occurred within the United States.