Updated November 5, 2026. Quick answer: The No Tax on Car Loan Interest Worksheet in the Instructions for Form 1041 (2025) is for non-grantor trusts and decedents’ estates. It caps qualified passenger vehicle loan interest (QPVLI) at $10,000, then reduces it by $200 for every $1,000, or part of $1,000, that the estate’s or trust’s adjusted gross income is over $100,000. It has 7 lines, and the result goes into the Form 1041 line 10 Interest entry. A statement with the vehicle identification number must be attached.
Who can claim it and how much
“Non-grantor trusts and decedents’ estates may be able to claim a deduction for qualified passenger vehicle loan interest (QPVLI)” “paid or accrued in 2025.” “In the case of a grantor trust, the eligibility of the grantor trust’s deemed owner to deduct the interest paid by the grantor trust as QPVLI is determined by disregarding the grantor trust and instead looking to the deemed owner” to test whether the requirements are met.
“A non-grantor trust or decedent’s estate can’t deduct more than $10,000 of QPVLI paid or accrued in 2025. The amount of the QPVLI deduction (after applying the $10,000 limit) is reduced if the AGI of the non-grantor trust or decedent’s estate is greater than $100,000.” “Complete the No Tax on Car Loan Interest Worksheet to determine the amount of the QPVLI deduction.”
A statement is required with the return: “In order to take the QPVLI deduction, the non-grantor trust or decedent’s estate must attach a statement to its Form 1041 with the vehicle identification number (VIN) of the purchased applicable passenger vehicle (APV)”.
What counts as QPVLI
“QPVLI is interest paid or accrued on a loan that meets all the following requirements.”
- “The loan was originated after December 31, 2024.”
- “The loan was originated by the non-grantor trust or decedent’s estate, or the non-grantor trust or decedent’s estate became the obligor on the loan by reason of the previous obligor’s death”
- “The proceeds from the loan were used to purchase an APV. Lease payments do not qualify.”
- “The APV is for personal use” (not expected to be used predominantly for business or commercial use; the instructions define personal use further, below).
- “The loan is secured by a first lien on the purchased APV.”
What counts as an applicable passenger vehicle
“In general, an APV is any vehicle that meets the following conditions.”
- “The original use of the vehicle starts with the non-grantor trust or decedent’s estate”, or for a change in obligor by reason of death, the original obligor; “a used vehicle does not qualify”.
- “The vehicle is a motor vehicle manufactured primarily for use on public streets, roads, and highways”
- “The vehicle has at least 2 wheels.”
- “The vehicle is a car, minivan, van, SUV, pickup truck, or motorcycle, and has a gross vehicle weight rating of less than 14,000 pounds.”
- “The vehicle has undergone final assembly in the United States.”
For personal use the instructions say: “A non-grantor trust or decedent’s estate is considered to have purchased an APV for personal use if, at the time the non-grantor trust or decedent’s estate incurs a loan to purchase an APV, the non-grantor trust or decedent’s estate expects that the APV will be used for personal use for more than 50% of the time” by the beneficiaries and relatives the instructions list.
The seven lines as the IRS prints them
| Line | Caption as printed |
|---|---|
| 1 | “Enter the amount of your paid or accrued QPVLI. See instructions. Don’t enter more than $10,000” |
| 2 | “Enter the estate’s or trust’s adjusted gross income. See instructions” |
| 3 | “Enter $100,000” |
| 4 | “Subtract line 3 from line 2.” If zero or less: “If zero or less, include the amount from line 1 in the entry you make on Form 1041, line 10, Interest.” If more than zero: “If more than zero, continue to line 5” |
| 5 | “Divide line 4 by $1,000. If the result isn’t a whole number, increase it to the next higher whole number.” |
| 6 | “Multiply line 5 by $200” |
| 7 | “Qualified car loan interest deduction. Subtract line 6 from line 1. If zero or less, enter -0-. Include this amount in the entry you make on Form 1041, line 10, Interest” |
Line 1: what goes in
The instructions give three steps for the amount on line 1:
- “Add together all interest paid or accrued in 2025 on a vehicle loan that qualifies as QPVLI.”
- “Subtract any interest on the loan that was reported elsewhere on the return instead of on Form 1041.”
- “If the amount determined after completing (1) and (2) is greater than $10,000, enter $10,000 on line 1. If the amount determined after completing (1) and (2) is less than or equal to $10,000, enter that amount on line 1.”
The same interest cannot be deducted twice: “If some of all of the QPVLI qualifies to be deducted in more than one place on the return, the non-grantor trust or decedent’s estate may choose where to report the deduction, but the non-grantor trust or decedent’s estate cannot deduct the same amount more than once.” Line 2 uses the estate’s or trust’s AGI figured under the Definitions section of the instructions (administration costs, the income distribution deduction, the exemption and any NOL deduction come off total income).
Three cases (this page’s own numbers)
The IRS prints no filled-in copy of this worksheet. Line 5 rounds up: “If the result isn’t a whole number, increase it to the next higher whole number.” The instructions’ own examples are “increase 1.5 to 2 and increase 0.5 to 1”. The cases below use only the printed arithmetic, with assumed amounts; every result is computed from them.
| Line | Case A (interest $6,000, AGI $90,000) | Case B (interest $8,000, AGI $112,500) | Case C (interest $10,000, AGI $150,000) |
|---|---|---|---|
| 1 (assumed; used to compute) | $6,000 | $8,000 | $10,000 |
| 2 (assumed; used to compute) | $90,000 | $112,500 | $150,000 |
| 3 (assumed; used to compute) | $100,000 | $100,000 | $100,000 |
| 4 (computed) | zero or less | $12,500 | $50,000 |
| 5 (computed) | skipped | 13 | 50 |
| 6 (computed) | skipped | $2,600 | $10,000 |
| 7 (computed) | $6,000 | $5,400 | -0- |
Case A: AGI of $90,000 is below $100,000, so line 4 is zero or less and the full $6,000 of interest goes into the Form 1041 line 10 entry (computed).
Case B: AGI is $12,500 over $100,000, which is 12.5 thousands, so line 5 is 13. Thirteen times $200 is $2,600, and $8,000 less $2,600 leaves a deduction of $5,400 (computed).
Case C: AGI is $50,000 over $100,000, so line 5 is 50 and line 6 is $10,000. With interest at the $10,000 cap, line 7 is zero: the reduction has used up the whole deduction (computed).
Edition
This page reads the Instructions for Form 1041 (2025), the file irs.gov served on 2026-11-05 (sha256 in the kit data); the QPVLI text is on printed pages 24 and 25 and the worksheet is on page 26. The $10,000 cap, the $100,000 AGI threshold and the $200 per $1,000 step belong to that 2025 edition. The Form 1040 version of this deduction is on Schedule 1-A and has its own page on this site.
Common mistakes
- Entering more than $10,000 on line 1. The caption says not to.
- Counting a lease. The instructions say lease payments do not qualify.
- Counting a loan that is not secured by a first lien, or a used vehicle. Both are listed as disqualifying.
- Deducting the same interest in two places. If it is claimed on Schedule C, E or F, it cannot also be claimed on line 10 as QPVLI.
- Rounding line 5 down. A result that is not a whole number goes up to the next whole number, so 12.5 becomes 13.
- Leaving out the statement with the VIN. The instructions require it to take the deduction.
Related: Form 1041 lines 10 to 12, and Schedule 1-A Part IV, the Form 1040 version.
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Answer againSources
- Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2025): https://www.irs.gov/pub/irs-pdf/i1041.pdf
- IRS, About Form 1041, U.S. Income Tax Return for Estates and Trusts: https://www.irs.gov/forms-pubs/about-form-1041
Read from the IRS documents linked above on November 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.