The car loan interest deduction applies only to tax years beginning after December 31, 2024 and before January 1, 2029. IRC §163(h)(4)(A). The investment interest rules have no year-specific change.
The car loan phase-out starts at $200,000 for joint returns and $100,000 for all others, including head of household. IRC §163(h)(4)(C)(ii).
AGI plus amounts excluded under IRC §911, §931, or §933. Used only for the car loan interest phase-out.
A
Vehicle Loan Interest
Total interest on the loan for the year. Do not include principal, fees, or add-on charges that are not interest.
40%
Documented business miles divided by total miles for the year. A mileage log or other adequate records are required. IRC §274(d).
Unreimbursed employee expenses are not deductible (miscellaneous itemized deductions are permanently eliminated). IRC §67(g); OBBBA §70110. A partner may deduct unreimbursed partnership expenses only if the partnership agreement requires the partner to pay them. Instructions for Schedule E, Unreimbursed Partnership Expenses.
All of these must be true: the vehicle is new (original use begins with you) and final assembly occurred in the United States; it is a car, minivan, van, SUV, pickup truck, or motorcycle under 14,000 lbs GVWR; the loan was incurred after December 31, 2024, is secured by a first lien, is a purchase loan (not a lease), and is not owed to a related party; and you report the VIN on your return. IRC §163(h)(4)(B), (D), (E); Treas. Reg. §1.163-16(e).
Tested once, when the loan is incurred, not each year. Use as an employee counts as personal use. Treas. Reg. §1.163-16(b)(11), (f).
IRC §163(h)(1) (personal interest not deductible); IRC §163(h)(2)(A) (interest allocable to a trade or business); IRC §163(h)(4) and Treas. Reg. §1.163-16 (qualified passenger vehicle loan interest, tax years 2025 through 2028); OBBBA §70203 (P.L. 119-21); IRC §63(b)(7) (available without itemizing); Schedule 1-A (Form 1040), Part IV; Pub. 463 (2025), Interest; IRC §274(d) (substantiation).
B
Investment Interest Expense
Margin and investment loan interest allocable to property held for investment. Excludes qualified residence interest, passive activity interest, and interest on debt that funds tax-exempt investments. IRC §163(d)(3), (h)(3); IRC §265(a)(2).
From the prior-year Form 4952, line 7. Carries forward indefinitely. IRC §163(d)(2).
Interest, ordinary dividends (including qualified dividends), annuities, and royalties not earned in a trade or business. Do not include gains from selling investments. Alaska Permanent Fund dividends are not investment income.
Total gains minus total losses on investment property, including capital gain distributions and capital loss carryovers. Enter zero for a net loss.
Net long-term capital gain over net short-term capital loss, investment property only. Line 4e is the smaller of line 4d or this amount.
Optional. Electing amounts are taxed at ordinary rates instead of the qualified dividend and capital gain rates. Cannot exceed line 4b plus line 4e. IRC §163(d)(4)(B).
Allowed deductions other than interest that are directly connected with producing investment income, such as depreciation or depletion. Miscellaneous itemized deductions are not allowed. IRC §163(d)(4)(C).
IRC §163(d)(1) (deduction limited to net investment income); IRC §163(d)(2) (carryforward); IRC §163(d)(3) (investment interest); IRC §163(d)(4) (net investment income, election in (B)); Instructions for Form 4952 (2026), lines 1 through 8; Instructions for Schedule A (2025), line 9; Temp. Treas. Reg. §1.163-8T and Treas. Reg. §1.163-15 (interest tracing).
Last verified: October 29, 2026
Projected figures are estimates and are not IRS-published. Every parameter used by this page is fixed by statute (none is indexed for inflation), so no projected amounts are used. Results are estimates for planning only.
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