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Car Loan Interest Deduction: What It Means for Gig Drivers
The short answer: for 2025 through 2028, you may deduct up to $10,000 a year of interest on a loan for a new, U.S.-assembled car bought mainly for personal use, even if you take the standard deduction. Drivers who use the car for gig work can also deduct the business-use share of car loan interest as a business expense, but the same interest can't be deducted twice.
Who qualifies for the new deduction
| Requirement | Details |
|---|---|
| Years | Tax years 2025–2028, loans taken out after December 31, 2024 |
| Amount | Up to $10,000 of interest per year |
| Vehicle | New (original owner), final assembly in the U.S., under 14,000 lbs |
| Use | Bought expecting more than 50% personal use; some business use is allowed |
| Loan | Secured by the car; leases and loans from family don't count |
| Income limit | Shrinks above $100,000 of modified AGI ($200,000 married filing jointly) |
| On your return | Report the car's VIN; no need to itemize |
The IRS has issued proposed rules, so details may still change (NATP).
How it works with gig driving
Self-employed drivers have long been able to deduct the business-use share of car loan interest on Schedule C, even when using the standard mileage rate. The new deduction is for personal-use interest. For a car used both ways:
- The car must have been bought expecting more than 50% personal use to qualify for the new deduction.
- Interest deducted as a business expense can't also be claimed under the new deduction.
- Many drivers split it: the business share on Schedule C, and the personal share under the new deduction if they qualify.
A car used mostly for gig driving likely won't qualify for the new personal deduction, but its business-use interest is still deductible as a business expense. This area is new, so have a tax professional confirm your split.
Example
A driver pays $3,000 of interest on a new U.S.-assembled car used 40% for gig work. About $1,200 (40%) could go on Schedule C as a business expense. The other $1,800 may qualify for the new deduction if income is under the limit.
Choosing a car deduction method too? See standard mileage vs. actual expenses and the complete gig tax guide.
FAQ
Can gig drivers use the new car loan interest deduction?
Possibly, if the car is new, assembled in the U.S., and was bought expecting more than 50% personal use. Business-use interest goes on Schedule C instead.
Do I have to itemize for the car loan interest deduction?
No. It can be claimed along with the standard deduction.
Does a used car qualify?
No. The vehicle must be new, with you as the original owner.
Sources: NATP: proposed car loan interest rules · IRS Publication 463. General information for planning, not tax, legal or financial advice. Rules have exceptions; check with a tax professional for your situation.