You Make the Call - Aug. 20, 2026

Question: Michael is single and has a modified adjusted gross income (MAGI) of $135,000. He purchases a new personal-use vehicle with a gross vehicle weight rating of less than 14,000 pounds in 2026 that has final assembly in the United States. He finances the purchase of the vehicle through an unrelated party. During the year, he pays $8,600 of interest on the loan. Can Michael deduct any of the $8,600 of auto loan interest, assuming all other requirements are met?

Answer: Yes. The One Big Beautiful Bill Act (OBBBA) created the qualified passenger vehicle loan interest deduction (QPVLI) for qualifying new personal-use vehicles. However, Michael faces the income phaseout for this deduction.

Because Michael’s MAGI exceeds $100,000 as a taxpayer filing single, he cannot deduct the full amount of the auto loan interest. For 2026, Michael can deduct a phased-out portion of the auto loan interest.

Michael’s MAGI of $135,000 exceeds the $100,000 threshold by $35,000. At $100 for each $1,000 of excess MAGI, his deduction is reduced by $3,500 ($35,000/$1,000 × $100). Therefore, he may deduct $5,100 of the $8,600 in auto loan interest paid in 2026.