Compliance
Compliance Tips for Employers: Reporting Car Loan Interest Under the One, Big, Beautiful Bill
New rules on reporting car-loan interest are coming—learn how lenders and businesses can stay compliant with transitional relief and avoid penalties in 2025.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
## What the New OBBB Requirement Entails
Under the **One, Big, Beautiful Bill (Public Law 119-21)**, new information-reporting obligations start in **tax year 2025** for recipients of interest on **qualified passenger vehicle loans**. Lenders and payors must file returns with the IRS and provide statements to borrowers showing total interest received on such loans and related loan information. ([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))
A “qualified passenger vehicle” includes cars, SUVs, pickup trucks, etc., with gross vehicle weight under 14,000 lbs, **purchased for personal use**, and **finally 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))
## Transitional Relief for 2025
To ease the burden, the IRS has provided relief so that for **2025**, lenders satisfy the requirement if they simply make a statement to the buyer indicating the total interest received during the year via:
- An online portal;
- Monthly or annual statements;
- Other similar accurate 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))
No penalties will be imposed if these transitional methods are used for calendar year 2025. ([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))
## Practical Steps for Lenders & Employers
- Update **systems** to track total interest paid by individuals on qualifying car loans under the defined criteria.
- Ensure Final Assembly criteria are verified: look at VIN decoding or final assembly label. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
- Prepare statements that communicate interest clearly to borrowers (portal, statement, etc.).
- Maintain documentation showing how the reporting obligation was fulfilled for 2025 to support relief from penalties.
## Implications for Individuals
- Borrowers receiving statements can use them to claim the **new deduction** for car-loan interest beginning with 2025. Amounts must be properly reported as per law. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
- Ensure the vehicle meets eligibility, and include VIN when claiming the deduction. Leasing does *not* qualify. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
## Summary Checklist
| For Lenders / Payors | For Individuals / Borrowers |
|---|---|
| Track total interest received on qualifying loans in 2025. | Ensure statements are received to support deductions. |
| Use portal/statement to meet obligation. | Verify vehicle and loan qualifies under rules. |
| Document process in case of IRS review. | Input correct VIN and interest amounts. |
By acting now to understand and adapt to these changes, both sides can avoid penalties and take full advantage of the deductible benefits beginning this tax year.