If you are budgeting for a car, it helps to separate the federal saving from the Oregon result. Under Oregon’s SB 1507, the new personal car-loan interest deduction does not reduce Oregon taxable income for tax years beginning on or after January 1, 2026. Oregon’s bill summary.
If your main question is what you can deduct for deliveries, rideshare driving or another business, start with our national guide to vehicle deductions for gig workers. It covers personal and business use, including scooters and bicycles. This page explains the Oregon difference.
Does my vehicle loan qualify for the federal deduction?
Before estimating a tax saving, check both the vehicle and the loan. Paying car-loan interest alone does not establish eligibility.
The federal provision runs from 2025 through 2028 and allows up to $10,000 of qualifying interest annually. Among the requirements: a qualifying loan originated after 2024, a new vehicle for personal use, final assembly in the United States, and a qualifying vehicle type and weight. Used cars and leases do not fit this purchase-loan deduction. You can qualify without itemizing. Keep the loan records, interest statement, and vehicle identification number (VIN). IRS interest guidance; IRS vehicle eligibility summary.
Could my income reduce or eliminate the deduction?
A phaseout gradually reduces a tax benefit as income rises. Here the reduction is applied to the qualifying interest amount, so a small deduction can disappear sooner than a larger one.
The income test uses modified adjusted gross income (modified AGI), a measure based on income from your tax return with adjustments specified for this deduction. Use the linked IRS rules to check that figure. First take qualifying interest, limited to $10,000. Reduce that amount by $200 for each $1,000, or fraction of $1,000, of modified AGI above $100,000, or $200,000 jointly. The reduction cannot make the deduction negative. Final federal regulations, section 1.163-16(h).
For example, a single filer pays $3,000 of qualifying interest and has $110,000 modified AGI. Ten $1,000 increments produce a $2,000 reduction, leaving a $1,000 deduction. At $115,000, that same $3,000 deduction disappears. The point is that someone with a smaller interest bill can lose the whole deduction at a lower income.
If I qualify federally, will I also save Oregon tax?
For the personal car-loan deduction on a 2026 return, Oregon does not provide the same benefit. You may still receive the federal saving.
Suppose you qualify for a $3,000 federal deduction and all of that amount would otherwise be taxed at 22%. The deduction reduces your federal tax by $660: $3,000 × 22%. For simplicity, this example assumes you qualify for the full $3,000 deduction and that every dollar of it reduces income taxed at 22%. These assumptions may not match your circumstances, even if you live in Oregon. Your deduction and tax saving will depend on your income, filing status and eligible loan interest.
Oregon requires that $3,000 deduction to be reversed when calculating Oregon taxable income. Tax instructions call this an addition or addback. It means Oregon does not let this particular deduction lower the income it taxes. It does not mean you owe an extra $3,000 in state tax. Oregon SB 1507 summary.
What if I use the vehicle for deliveries or another business?
Business-expense deductions follow separate rules. Oregon’s rejection of the new personal deduction does not mean every deduction for vehicle interest is lost.
For a car used partly for work and partly personally, the federal rules allow certain borrowers to claim interest as a business expense, under the new personal deduction, or through a permitted combination. Each dollar can be deducted only once. How the interest is claimed matters when preparing the Oregon return. IRS final loan-interest rules.
Our gig-worker vehicle guide explains who can qualify and how to keep business costs separate. An accountant or tax preparer can help compare the federal and Oregon treatment using your actual use and loan records.
Does this change my 2025 return filed in 2026?
The Oregon change described here starts with the 2026 tax year. Filing a return during 2026 does not make it a 2026 tax-year return. Check the instructions for the year printed on the return. The 2026 addition should not automatically be applied to a 2025 return.
How should I use this information?
These educational examples can help you prepare questions for a qualified accountant or tax preparer. Your vehicle, loan, income and business use determine the result. If paid help is out of reach, IRS-supported free tax-preparation programs may be an option; ask whether your return is within the local site’s services.