The IRS has provided 2025 transitional guidance for businesses required to report car loan interest under the bill commonly referred to as the One Big Beautiful Bill Act, or OBBBA for short. 

New Deduction

As a reminder, a new deduction of up to $10,000 per year for 2025 through 2028 is available to individuals for qualified passenger vehicle loan interest paid. This deduction phases out once modified adjusted gross income exceeds $100,000, or $200,000 for joint filers.

Interest qualifying for the deduction must be paid on a loan that is:

• Originated after December 31, 2024,
• Used to purchase a new personal use vehicle (used vehicles will not qualify), and
• Secured by a lien on the vehicle.

Qualifying vehicles include a car, minivan, SUV, truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds and has undergone final assembly in the United States.

2025 Reporting Relief

To facilitate an individual’s deduction, businesses that receive interest of $600 or more from an individual for the calendar year on a qualified passenger vehicle loan must comply with new reporting requirements.

According to the IRS, statistics show that sales of all new passenger cars in the United States totaled approximately 2.4 million last year and over 80 percent of those car sales were financed, often at the dealership.

Since lenders and the IRS will need time to implement system changes for this reporting, Treasury is offering relief for the transition year in Notice 2025-57. It provides penalty relief and guidance to certain lenders for new information reporting requirements for qualifying car loan interest received in 2025 under OBBBA.

The IRS will consider that lenders have met their reporting obligations for interest received on a qualified passenger car loan in 2025 if they make a statement available to the buyer on or before January 31, 2026 indicating the total amount of interest received on a specified passenger vehicle loan during 2025.

The Notice provides that lenders can meet their 2025 reporting requirements by making the total amount of interest received available through the following examples:

• On an online portal that the buyer can easily access;
• In a regular monthly statement; 
• On an annual statement that is provided to the buyer; or 
• By other similar means designed to provide accurate information to the buyer regarding interest received.

In addition, the IRS will not impose penalties on lenders for a failure to file information returns and provide payee statements if they satisfy their reporting obligations as described in the Notice.

Look Ahead

While this is welcome relief for lenders with upcoming new reporting requirements this January, it’s important to make system changes now to comply once rules are in full effect for tax years 2026 through 2028.
 


 

Published: 10/22/2025

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