Copyright Newsweek
The Department of the Treasury and the Internal Revenue Service (IRS) have announced new temporary measures to help businesses and lenders that are required to report car loan interest payments transition to the new reporting requirements under President Donald Trump’s One Big Beautiful Bill Act (OBBB). These measures include interest deductions, penalty relief, and simplified reporting options, giving those affected greater flexibility in how they comply with the new IRS reporting rules during the transitional year. Why It Matters The transition relief for reporting car loan interest marks a significant change in tax policy under the OBBB, signed into law by Trump on July 4. The policy allows U.S. taxpayers to deduct interest paid on qualified new car loans—a move that affects millions of car buyers and the financial institutions that serve them. With over 80 percent of new U.S. vehicle sales financed through loans, the new transitional relief could impact tax filings, vehicle affordability, and lender operations nationwide, especially as the auto market remains central to U.S. consumer spending and borrowing. What To Know Under Notice 2025-57, the Treasury and IRS are granting temporary relief for entities required to report car loan interest payments. The measure allows qualifying taxpayers to deduct interest on loans for vehicles assembled in the United States, provided the loans were initiated after December 31, 2024, and before January 1, 2029. Key provisions: Lenders must file returns and issue borrower statements showing total interest received on qualified passenger vehicle loans. Qualified vehicles include cars, SUVs, minivans, pickup trucks, vans, and motorcycles under 14,000 pounds gross weight, assembled in the U.S. For 2025, lenders may meet requirements by providing interest information through online portals, statements, or similar accessible formats. If they do so, the IRS will not impose penalties for failing to file traditional information returns. The rule applies only to lenders receiving at least $600 per year in interest from an individual borrower. What People Are Saying According to the official IRS press release: “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.” What Happens Next The transitional relief gives lenders time to modernize technology and compliance processes ahead of stricter reporting expected in 2026. Further IRS guidance is anticipated. Borrowers claiming deductions from 2025 through 2028 should retain vehicle identification numbers (VINs) and proof of U.S. assembly to support eligibility. Taxpayers and financial institutions are encouraged to monitor ongoing updates from the IRS as final regulations are developed.
