Used cars
Don't qualify. The law requires that the vehicle's original use begins with you. A two-year-old car with one previous owner fails that test even if it was built in the U.S.
Leases
Lease payments never qualify, including the part a leasing company calls a money factor or rent charge. If you buy a leased car out at the end with a new loan, that's a used vehicle, so it doesn't qualify either.
Refinancing
Interest on a refinanced loan counts if the loan being refinanced qualified, the new loan is secured by a first lien on the same vehicle, and the new balance doesn't exceed the old one. Cash-out on top of the old balance doesn't qualify.
Bought in 2024, or earlier
The loan has to be incurred after December 31, 2024. A 2024 loan doesn't qualify, and refinancing it in 2025 doesn't change that, because the original debt didn't qualify.
Business or mixed use
The vehicle must be for personal use. Interest you deduct as a business expense on Schedule C, E or F can't also go on Schedule 1-A; the form subtracts it. Fleet loans and commercial vehicles not used personally are excluded.
Loans from family
A loan from a related person, such as a parent or a business you control, doesn't qualify. It has to be a loan from an unrelated lender, secured by the vehicle.
Salvage and scrap
Loans for vehicles with a salvage title, or bought for parts or scrap, are excluded.
What you need to claim it
Your lender's statement of interest paid, the VIN, and Schedule 1-A, Part IV. The deduction is up to $10,000 a year and drops by $200 for each $1,000, or part of $1,000, of income over $100,000 ($200,000 joint).
Updated November 3, 2026. Sources: Internal Revenue Code §163(h)(4), IRS Fact Sheet 2025-03, 2025 Schedule 1-A (Form 1040), NHTSA vPIC VIN decoder.