Gap Insurance + Loan Interest Deduction Calculator
Gap premiums rolled into the loan — what actually deducts.
The short answer: The short answer: the interest on your loan deducts, including interest on the gap premium if it's financed inside the qualified loan; the gap premium itself is not deductible. At the numbers below, the deduction is $3,100, worth $682 at 22%.
New, US-assembled vehicle only
Modified Adjusted Gross Income
Car Loan Interest Deduction
$3,100
✅ You qualify for the full deduction
⚠️ This calculator provides estimates for informational and educational purposes only. It is not tax advice. Results are based on the One Big Beautiful Bill Act (OBBBA) and IRS Schedule 1-A. Consult a qualified tax professional for your specific situation.
The Split
Gap insurance is a product premium, not interest — it never deducts. But when financed inside your vehicle loan, it generates interest that does.
- • Financed gap premium → its share of interest deducts (it's loan interest)
- • Gap premium itself → not deductible
- • Dealer gap at $800 vs CU gap at $300: cheaper gap = less financed = less interest — but the choice isn't tax-driven
Worked Example
Single buyer with a $28k loan including $700 gap, $3,100 of annual interest.
- • Deduction $3,100 on the full interest (gap-financed interest included); $682 at 22%
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Frequently Asked Questions
Is gap insurance deductible under the OBBBA?
No — the premium isn't interest. Only the loan interest it generates when financed is deductible.
Should I finance gap to get more interest to deduct?
No — you'd pay $1 of interest to recover 22–35 cents. Buy cheaper gap, finance less.