Teen Driver Car Loan Interest Deduction Calculator
For parents financing a first car in their own name.
The short answer: At the numbers below, the parent-side deduction is $1,900 — $228 back at 12% ($9 per paycheck).
New, US-assembled vehicle only
Modified Adjusted Gross Income
Car Loan Interest Deduction
$1,900
✅ 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.
Whoever Pays and Is Liable Deducts
Parents financing a teen's car in their own names deduct the interest on their return. Loans co-signed with the teen follow whoever actually pays.
- • Parent-named loan, parent pays → parent deducts
- • Teen-named loan, teen pays → teen deducts (often a low bracket)
- • Insurance in the teen's name doesn't move the deduction
Worked Example
MFJ parents, $1,900 of interest on a teen's starter car.
- • Deduction $1,900; $228 at 12%
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Frequently Asked Questions
Can parents deduct interest on a teen's car loan?
Yes if the parents are the borrowers and actually pay the interest.
What if the loan is in my teen's name with me as cosigner?
The payer deducts — typically the teen if they make the payments from their job.