New Car Loan Interest Deduction for Gig Drivers (2026)

The dealer's year-end sale has the SUV you want at a price that finally works, and the finance manager is printing the loan contract. You drive DoorDash or Uber a few evenings a week, and you've heard there's a new deduction for car loan interest. Two questions before you sign: does gig driving disqualify you, and if it doesn't, do you deduct the interest as a business expense, as the new deduction, or both?

Does your car qualify?

The deduction comes from section 163(h)(4), added by the One, Big, Beautiful Bill Act. The IRS finalized its rules in TD 10054 on September 8, 2026. All of these have to be true:

• New, not used. The car's original use has to start with you, and the lender's paperwork has to treat it as a new vehicle. A used or certified pre-owned car doesn't qualify.
• Final assembly in the US. The window sticker lists the final assembly point, and you can also check the plant of manufacture by entering the VIN in NHTSA's VIN decoder. The brand's home country doesn't matter. Where this particular car was assembled does.
• A loan, not a lease. Lease financing is excluded. The loan must be taken out after December 31, 2024, and secured by a first lien on the car.
• A passenger vehicle. A car, minivan, van, SUV, pickup or motorcycle with a gross vehicle weight rating under 14,000 pounds.
• Mostly personal use, which is the part gig drivers need to think about (next section).
• The VIN on your return. You have to report it to claim the deduction. Lenders that receive $600 or more of interest from you in a year send Form 1098-VLI, which shows the interest and the VIN.

Interest on things routinely financed with the car counts too: sales tax, dealer and registration fees, service contracts and extended warranties. Interest on unrelated purchases rolled into the loan, like a trailer, doesn't.

The 50% personal-use test for someone who drives for apps

The rule is about what you expect when you take out the loan: the car will be used for personal purposes more than 50% of the time you expect to own it. The final regulations give two examples that are close to home:

• A buyer who expects 85% personal use and 15% driving for a rideshare service qualifies. The regulations say the rideshare driving "does not preclude" the deduction.
• A buyer who expects to use the car 60% in a sole-proprietor contracting business and 40% personally doesn't qualify.

A few details matter for drivers:

• It's tested once. You don't re-test every year. If you expected mostly personal use when you signed and later drive more gigs than planned, the loan still qualifies. Write down your expectation when you buy (for example, "DoorDash about three evenings a week; family car the rest"), because you won't remember in 2028.
• Family use counts as personal. Use by your spouse, or by a child, parent, sibling or other relative on the dependency rules' relationship list, counts toward the personal side.
• Commuting and W-2 driving count as personal. The regulations define personal use as anything other than a trade or business or producing income, and they exclude driving done as an employee from "business." So a W-2 job that has you drive doesn't push you toward the business side.
• The test is about time, not dollars. The rule says "time," and it doesn't say how to measure it. A mileage log is the most concrete record most drivers will have of how the car was actually used.

If you drive full-time and the car is mostly a work vehicle, be honest with yourself here. The new deduction isn't for you, but the business share of the interest still is (below).

Splitting the interest: Schedule C, Schedule 1-A, or both

This is the part most write-ups skip. Publication 463 already lets self-employed drivers deduct the business-use part of car loan interest on Schedule C, in addition to the standard mileage rate. The IRS's example: use the car 60% for business and you deduct 60% of the interest. Gas, insurance and depreciation are built into the mileage rate. Interest isn't. (The full list of what stacks on top of the rate is in write-offs that stack with standard mileage.)

When the loan also qualifies for the new deduction, the business share can be deducted either way. The regulations call it "independently deductible interest." You pick, and whatever you put on Schedule C reduces what you can claim on Schedule 1-A. Publication 463 says it plainly: you "cannot deduct the same amount more than once."

Here's a hypothetical driver with one full year of payments on a qualifying loan:

Either way the full $2,300 is deducted for income tax. The difference is self-employment tax. A Schedule C deduction lowers your net profit, which is what the 15.3% self-employment tax is figured on (how Schedule SE works). Schedule 1-A is subtracted after adjusted gross income, so it doesn't touch self-employment tax. For most drivers that makes Option A the better split. Two cases where you'd check with a preparer: a lower Schedule C profit also trims the 20% qualified business income deduction a little, and if your income is high enough that the new deduction phases out, Schedule C may be the only place the business share counts at all.

The standard mileage deduction for the 5,400 business miles is separate and comes on top of either option. Tolls and parking on business trips also stack (parking and tolls).

The income phase-out and the $10,000 cap

• The cap is $10,000 per return, including a joint return. Married couples filing separately each get their own $10,000.
• The deduction drops by $200 for every $1,000 (or part of $1,000) of modified AGI over $100,000, or over $200,000 on a joint return. Even a full $10,000 deduction is gone by $150,000 single and $250,000 joint.
• You don't have to itemize. Schedule 1-A works with the standard deduction.
• It covers interest paid in 2025 through 2028. A car bought in late November 2026 gives you only a payment or two of 2026 interest. Most of the value comes in 2027 and 2028.

Records to keep from the day you sign

• The retail installment contract, showing a new vehicle, the amount financed and the lender's first lien.
• The window sticker or a VIN-decoder printout showing US final assembly.
• A dated note of how you expected to use the car, for the 50% test.
• An odometer photo on the day you take delivery and every January 1, plus a mileage log of business trips. Those give you the business-use share for Schedule C (how to keep an odometer photo log).
• Form 1098-VLI or the lender's year-end interest statement.

If you're still deciding whether to buy at all for the tax break, the depreciation side of a year-end purchase is in buy a car before December 31 for the write-off? That deduction is separate from the interest.

Who this isn't for

• Used-car buyers. The new deduction is out. If you're self-employed, the business share of used-car loan interest still goes on Schedule C.
• Leases. Excluded by the statute. The business share of lease payments works differently (leasing a car for gig driving).
• Full-time drivers whose car is mostly for work. You fail the 50% test, so it's Schedule C only, for the business share.
• Cash buyers, since there's no interest, and anyone whose car had its final assembly outside the US.
• Incomes past the phase-out ($150,000 single, $250,000 joint).

Where TaxMiles fits, and where it doesn't

We make TaxMiles, so weigh this accordingly.

• It gives you the business-use share. Drives are detected automatically and you swipe each one to Business or Personal. The odometer log keeps dated readings with an optional dashboard photo. With Pro, it also shows business use as a percentage of the miles between readings; that percentage times your interest is the Schedule C figure. On the free plan you can do the same division by hand from the readings and your business-mile total.
• It values the miles. 2026 business trips are valued at 72.5¢ through June 30 and 76¢ from July 1. The 2027 rate isn't in the app yet; the IRS usually announces it in December.
• What it can't do. There's no car loan interest category, it doesn't read Form 1098-VLI or check VINs or assembly plants, and it doesn't fill out Schedule C or Schedule 1-A. It doesn't measure "time" for the 50% test, only miles. It's a mileage log and estimate tool, not tax advice.
• The free plan covers your first 40 business trips in total. Pro is $7.99 a month or $59.99 a year.

Frequently asked questions

Can I take the new car loan interest deduction if I drive for Uber or DoorDash?

Yes, if when you took out the loan you expected the car to be used for personal purposes more than 50% of the time. The final regulations use a rideshare driver who expects 15% gig use as an example of a car that still qualifies. If you expected gig work to take most of the car's time, the loan doesn't qualify, and only the business share of the interest is deductible, on Schedule C.

Can I deduct car loan interest on Schedule C if I use the standard mileage rate?

Yes, if you're self-employed. Publication 463 lets you deduct the business-use part of car loan interest on Schedule C even when you use the standard mileage rate. Employees can't.

Can I claim the same interest on Schedule C and Schedule 1-A?

No. The business share can go on either form, but not both. Whatever you put on Schedule C comes off the amount you can claim as qualified passenger vehicle loan interest.

Does a used car or a lease qualify?

No. The car's original use has to start with you, so used cars are out, and lease financing is excluded by the law. A self-employed driver can still deduct the business share of interest on a used-car loan on Schedule C.

Sources: Treasury and IRS, TD 10054, Car Loan Interest Deduction (final regulations, September 8, 2026): §1.163-16 personal-use definition, the more-than-50% expected personal-use standard and its rideshare and contractor examples, independently deductible interest, the $10,000 per-return limit and the $200-per-$1,000 phase-out above $100,000/$200,000, interest on customarily financed items; REG-113515-25 (proposed regulations, January 2, 2026): US final assembly shown by the VIN plant code or the vehicle label, and NHTSA's VIN decoder; IRS Publication 463 (2025), chapter 4: self-employed drivers deduct the business part of car loan interest on Schedule C even with the standard mileage rate, may report eligible interest on either Schedule 1-A or Schedule C but not both; IRS standard mileage rates (72.5¢ January 1–June 30, 2026; 76¢ July 1–December 31, 2026). Checked November 1, 2026.

This article is general information for US federal income tax, not tax or legal advice. The worked example is hypothetical: made-up interest and mileage, one car, the standard mileage rate, and it ignores the qualified business income deduction. Whether a particular loan and vehicle qualify depends on your documents; ask a tax preparer before you file. TaxMiles is published by Gigabyte LLC, the company that wrote this article.