Tax Planning
How OBBB’s New Car Loan Interest Reporting Affects Borrowers & Lenders
Beginning with loans incurred after December 31, 2024, certain car loan interest is deductible and information reporting is required—but the IRS provides transitional relief for 2025 to ease compliance.
By NomadicTax Research Team • 5-8 min read • November 16, 2025
## A New Deduction and Reporting Requirement
Passed as part of the One, Big, Beautiful Bill (OBBB), section 163(h)(4) now **excludes “qualified passenger vehicle loan interest” (QPVLI)** from the definition of *personal interest* for loans incurred after **December 31, 2024**, making such interest **deductible** through **December 31, 2028**. Cleared for years 2025-2028.([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))
Alongside that, new reporting obligations under **section 6050AA** require that **lenders who receive $600 or more in interest** from an individual on a qualified passenger vehicle loan must file information returns and furnish statements to the borrower, including loan details.([irs.gov](https://www.irs.gov/irb/2025-45_IRB?utm_source=openai))
## Relief for 2025: What the IRS Allows
To ease into this complex change, the IRS has issued **Notice 2025-57**, providing **transitional guidance and penalty relief** for lenders in 2025. Key relief includes:
- Ability to satisfy 6050AA's requirements by issuing a **statement** (annual, monthly, or via online portal) indicating **total interest received** in calendar year 2025 instead of filing full information returns immediately.
- No penalties under sections 6721 and 6722 for failure to file returns or furnish statements—if lenders follow this relief path.([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 Implications for Borrowers & Lenders
| Stakeholder | What to Do in 2025 | What to Expect in 2026-2029 |
|---|---|---|
| Lender / Car Dealer | Update systems to track interest payments more carefully; ensure you can generate statements or portal access for borrowers. | Full reporting becomes mandatory—information returns and borrower statements both required by law. |
| Borrower | Ask for statements showing interest paid. Use this info to calculate deductions under QPVLI. | Keep statements for tax filing; be aware of full reporting so the IRS has a record. |
## Example: How It Plays Out
**Scenario:** Anna takes out a loan for a personal SUV (qualifies as a “qualified passenger vehicle”) on February 1, 2025. The loan is secured by the vehicle.
- She pays $1,200 in interest during 2025. Since interest >$600, **lender** must issue a statement showing $1,200 by January 31, 2026, but under relief, they aren’t penalized.
- On her return, Anna can **deduct** $1,200 as QPVLI when filing her 2025 taxes, under section 163(h)(4). Only loans incurred after Dec. 31, 2024 qualify.
## Key Planning Steps Right Now
- **Borrowers** should gather all interest statements starting now—especially if you financed a passenger vehicle after the cutoff.
- **Lenders** should set up methods for statements and consider the technical infrastructure for full reporting ahead of the 2026 tax year.
- Include this change in education for customers: many won’t realize this interest becomes deductible under new law.
**Category:** Tax Planning