Compliance

Navigating Compliance: New Reporting for Car Loan Interest Under the OBBB

Learn what lenders and businesses must do in 2025 and beyond under section 6050AA to report car loan interest and avoid penalties, plus what individuals should expect.

By NomadicTax Research Team • 5-8 min read • November 14, 2025

## What’s New Under Section 6050AA Enacted as part of the One, Big, Beautiful Bill (OBBB), section 6050AA requires **information reporting** of interest received on qualified passenger vehicle loans from individuals. Also, under section 163(h)(4), taxpayers may **deduct this interest** if certain conditions are met.([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)) **Definition of key terms**: - **Qualified passenger vehicle loan interest (QPVLI)**: Interest from indebtedness incurred after December 31, 2024, for purchasing an applicable passenger vehicle used personally. - **Specified passenger vehicle loan**: A loan secured by an applicable passenger vehicle. The vehicle must be of gross weight rating < 14,000 lbs and final assembly 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)) - **Reporting threshold**: Recipients must report interest of **$600 or more** received in a calendar year. Information return must include name/address of individual, amount of interest, loan origin date, information about vehicle, etc.([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 Recognizing system changes needed, the IRS is providing **relief to lenders and interest recipients** in 2025 if they satisfy reporting obligations by making a statement available to buyers—via online portal, monthly or annual statements, or similar means—and avoid penalties under sections 6721 and 6722.([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)) Also, the statement must be made **on or before January 31, 2026**. ## What Businesses Should Do Now - Identify all qualified passenger vehicle loans incurred after December 31, 2024. - Update systems to track **interest receipts** per borrow and vehicle info as required by 6050AA. - For 2025, ensure accurate statements are provided in acceptable format. - Plan for full filing of information returns in 2026 when standard forms and systems are required. ## For Individuals & Taxpayers - Save **any statements** of interest paid on vehicle loans—they could be needed for claiming interest deductions. - Understand that QPVLI is **deductible** under new rules, even though historically personal vehicle interest has not been deductible. - Make sure tax return reflects correct vehicle usage and loan eligibility. ## Example Case **Sarah finances a new SUV (12,000 lbs, final assembly in U.S.) on January 1, 2025.** She makes $4,000 in interest payments during the year. The dealer-finance (or lender) business must issue a statement totaling $4,000 interest, listing the vehicle info, loan origin, etc., to her by Jan 31, 2026—online or in writing. Sarah may be able to claim this interest as a deduction when filing TY 2025 return. ## Compliance Risks - Failure to provide statements or file information returns could lead to penalties under sections 6721 (information return penalties) and 6722 (recipient statement penalties). - Misclassification of vehicle type or usage may disqualify the deduction or trigger audits. ## Bottom Line This change turns what was once nondeductible personal vehicle interest into a potential deduction. With transitional relief for 2025, both businesses and individuals have time to adapt—but proactive record-keeping and system updates are essential.