Big news from the Department of the Treasury and the IRS! They just rolled out some temporary measures aimed at helping businesses and lenders adapt to the new protocols for reporting car loan interest, following President Trump’s One Big Beautiful Bill Act (OBBB).
These new rules bring perks like interest deductions, penalty waivers, and easier reporting options, making it simpler for people involved to comply with these changes during this transition period.
Why This is Important
This update on car loan interest reporting is a major shift in tax policy under the OBBB, which Trump signed into law on July 4th. It now allows Americans to deduct interest for loans on qualified new cars, something that impacts a boatload of car buyers and the financial institutions behind those loans. With a whopping 80% of new vehicle sales in the U.S. being financed, this relief has big implications for tax filings and how affordable vehicles will be out there. Plus, let’s not forget the overall importance of the auto market to consumer spending and borrowing in the U.S.!
Key Points to Keep in Mind
According to Notice 2025-57, the IRS is providing this temporary relief for reporting car loan interest payments. Here’s the scoop: qualifying taxpayers can now deduct interest on loans for vehicles that were put together right here in the U.S. as long as these loans started between December 31, 2024, and January 1, 2029.
Important details include:
- Lenders are required to submit returns displaying total interest received on passenger vehicle loans.
- Qualified vehicles involve cars, SUVs, minivans, pickup trucks, vans, and even motorcycles, as long as they weigh under 14,000 pounds and are made in the U.S.
- For 2025, lenders can meet the reporting requirements with information provided through online platforms or accessible statements. If they follow these guidelines, no penalties will be imposed by the IRS for missed traditional returns.
- This rule applies to lenders who receive over $600 in interest per year from a single borrower.
Voices from the Community
The IRS stated: “We won’t penalize lenders for failing to file information returns or provide payee statements, as long as they follow the reporting rules outlined in this Notice.”
What’s Coming Up
This transitional relief is likely to help lenders upgrade their technology and compliance systems before more rigorous reporting is put in place in 2026. Additional guidance from the IRS is keeing on the horizon. Borrowers looking to claim deductions from 2025 to 2028 should hold onto their vehicle identification numbers (VINs) and proof that the vehicles were made in the U.S. to back their eligibility.
It’s a good idea for taxpayers and financial institutions to stay tuned for the latest updates from the IRS as they finalize new regulations.
