Compliance
How to Handle the New Car Loan Interest Reporting Requirement Under OBBB
The One, Big, Beautiful Bill added rules for reporting car loan interest on qualified passenger vehicles. Here's what lenders, businesses, and individual borrowers need to know.
By NomadicTax Research Team • 5-8 min read • November 24, 2025
## What Are the New Rules?
Under Section 70203 of the One, Big, Beautiful Bill (OBBB), interest paid on a **qualified passenger vehicle loan** can become deductible for personal use loans incurred after December 31, 2024 and before January 1, 2029.([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)) Businesses receiving **$600 or more in interest** from individuals under such loans in a calendar year must report the interest received and provide statements to borrowers. These are new information reporting requirements.([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))
To ease into compliance, the IRS issued **Notice 2025-57**, which grants **transitional relief** for 2025: as long as lenders make a statement available (via annual statement, monthly statement, online portal, or other means) showing total interest received on the vehicle loan, **penalties won’t be imposed** for failing to file fully compliant information returns or statements for this year.([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 Impacted?
- Lenders and dealers who finance vehicles for personal use.
- Borrowers paying interest on such loans who may now deduct them under IRS rules, if eligible.
- Tax professionals advising clients in lending or auto finance businesses.
## Practical Example
John purchases a new SUV with a gross vehicle weight rating less than 14,000 lbs, financed by DealerCo. In 2025, John pays **$1,200 in interest** during the year. Under Notice 2025-57, DealerCo must provide John with a statement showing total interest paid. John may use that statement when filing his 2025 tax return. Lender won’t be penalized this year under those relief rules. For 2026 onwards, more formal reporting will be required.
## Steps for Compliance & Planning
- **Lenders**: update systems to calculate total interest per borrower, prepare statements (annual or monthly), online or printed, ensure statements can be delivered by Jan 31, 2026.
- **Borrowers**: request the interest statements; retain them to support deductions.
- **Tax preparers**: include line items in tax returns for interest paid on qualified loans; educate clients early about new deductible opportunities.
## Tips & Caveats
- Vehicle must be used for personal use, not business use.
- The weight limit classifies what is a “qualified passenger vehicle” under the law.
- Deduction applies only for taxable years beginning **after Dec 31, 2024**.
- Relief is only through 2025 under Notice 2025-57; 2026 expects full compliance.
## Why It’s Significant
This change can shift how people finance cars and how lenders structure statements. For individuals, it introduces a new potential deduction. For businesses in auto finance, compliance obligations are expanding. Effective transitions will depend on clear statements and system updates. As 2026 tailors to fuller enforcement, early adoption pays off.