What’s new under the law
Signed into law in July 2025, the One, Big, Beautiful Bill Act introduced a temporary above-the-line deduction under IRC §163(h)(4) for qualified passenger vehicle loan interest (QPVLI). The loan must be a new passenger vehicle (car, SUV, or similar) under 14,000 pounds, final assembly in the U.S., and incurred after December 31, 2024. (irs.gov) The deduction applies only for vehicles used for personal, not business purposes, and runs through 2028. (irs.gov)
Reporting requirements for lenders & transitional relief
Lenders (or anyone receiving $600+ in interest from individuals on these loans) are required to:
- File information returns to the IRS
- Provide annual statements to borrowers disclosing interest received and other loan info. (irs.gov)
Because implementing an entirely new system is complex, the IRS released Notice 2025-57, giving transitional guidance for 2025: lenders can satisfy reporting duties by providing borrowers a statement showing total interest received in 2025 by January 31, 2026, without filing formal returns to IRS yet. (irs.gov) Penalties under sections 6721-6722 won’t apply so long as this interim statement is provided. (irs.gov)
Steps for borrowers & lenders
- Lenders: Begin tracking qualifying passenger vehicle loans from individuals, compile interest data, ensure you can produce statements by Jan 31, 2026. Set up clearly marked borrower statements (online portal, monthly/annual or similar) as acceptable under the guidance. (irs.gov)
- Borrowers: Keep all statements received and monitor interest paid—these will impact whether your QPVLI deduction applies. Keep in mind this deduction only for interest under personal use, and vehicles assembled in the U.S., as defined by law.
Example comparison
- If you finance a new SUV assembled in Michigan on May 1, 2025, for personal use, that interest qualifies. If the 2025 statement from your lender shows $1,200 interest, that can go toward your QPVLI deduction.
- If the lender instead fails to issue misformed statements or misses the deadline, because penalties are waived under the transitional rule, you may avoid sanctions—but better to comply.
Takeaway
This OBBB provision gives borrowers a tax break and adds reporting obligations for lenders. Transitional relief in 2025 softens the burden, but full requirements will apply after this first year. Lenders should prepare systems now, while borrowers should track interest and confirm statements. The temporary benefit won’t last indefinitely, so thoughtful planning is essential.