Compliance
Compliance Guide: New Reporting for Car Loan Interest & Simplified Enforcement Rules
New IRS rules require lenders to report interest on certain vehicle loans, but 2025 comes with transitional relief. Learn what’s required, and how to comply without penalties.
By NomadicTax Research Team • 5 min read • November 19, 2025
## Background: OBBB Reporting Requirements for Car Loans
Under the One, Big, Beautiful Bill, lenders and interest recipients must report information about interest paid on qualified passenger vehicle loans incurred after Dec. 31, 2024. This reporting includes amounts to borrowers as well as information returns to the IRS. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-transition-relief-for-2025-for-businesses-reporting-car-loan-interest-under-the-one-big-beautiful-bill?utm_source=openai))
However, for **2025**, the IRS provides **transition relief**: lenders are safe from penalties if they merely make the total interest received available to borrowers via online portals, annual or monthly statements, or other similar means. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-transition-relief-for-2025-for-businesses-reporting-car-loan-interest-under-the-one-big-beautiful-bill?utm_source=openai))
## Who is Affected and When It Becomes Fully Enforced
- **Qualified passenger vehicles** defined under OBBB are cars, SUVs, trucks, vans, motorcycles under 14,000 lbs, assembled in the U.S. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-transition-relief-for-2025-for-businesses-reporting-car-loan-interest-under-the-one-big-beautiful-bill?utm_source=openai))
- The reporting requirement applies to **interest of $600 or more** received. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-transition-relief-for-2025-for-businesses-reporting-car-loan-interest-under-the-one-big-beautiful-bill?utm_source=openai))
- Transition relief applies for **calendar year 2025**; full compliance (including penalties) begins **2026** unless guidance changes.
## Key Compliance Steps for Lenders and Borrowers
### For Lenders / Dealers:
- Develop systems to capture total interest received on qualified vehicle loans.
- Include disclosure of interest received in borrower statements: monthly billings, annual statements, or online access.
- Plan now for full information returns filing in 2026—ensure tax software, staff training, and workflow are ready.
### For Borrowers (Individuals):
- Review statements from lenders; ensure that interest reported matches your records.
- Hold documentation if statements are delivered via portal or monthly statements.
- Use interest deduction eligibility correctly only when personal use; business use rules differ.
## Example Scenario
Mike takes a new 2025 SUV loan financed at a dealership (qualified passenger vehicle). He pays $800 interest in that year. For 2025, under transition relief, the lender must provide a statement showing the $800. No penalties apply even if the IRS information return is not yet filed. But for 2026, full compliance (including proper returns) will be required.
## Penalties & Risk Areas to Watch
- Failing to supply interest info to borrowers by required date or method.
- Under reporting or misclassification of vehicles (e.g., weight, assembly) can lead to non-compliance.
- Ensure new software or portals protect data privacy if using online portals.
## Action Plan Ahead of 2026
1. Audit current loan reporting infrastructure.
2. Upgrade systems to track interest and provide statements via required formats.
3. Train staff and communicate to customers what statements they’ll receive.
4. Consult your tax or legal counsel to ensure vehicle qualifications under OBBB are correctly interpreted.
Staying ahead of these changes will help lenders avoid penalties and borrowers maximize deductions where eligible.