The U.S. Treasury Department and the Internal Revenue Service have provided transitional guidance for businesses required to report car loan interest under the One, Big, Beautiful Bill Act (OBBBA).
Notice 2025-57 provides penalty relief and guidance to certain lenders for new information reporting requirements for car loan interest received in 2025. To facilitate implementation, the IRS is granting temporary relief from full reporting obligations for the 2025 calendar year.
Background
- The OBBBA revised § 163(h) to exclude interest on qualified passenger vehicle loans from the definition of “personal interest” for 2025–2028.
- New § 6050AA requires a business (the “recipient”) to file an information return if it receives $600 or more in interest during a calendar year from an individual on a qualified passenger vehicle loan.
- Recipients must also furnish a statement to the borrower by January 31 of the following year.
- Penalties under §§ 6721 and 6722 apply for failure to file or furnish unless there is reasonable cause.
Transitional Relief for 2025
- For interest received in calendar year 2025, the IRS will not require full § 6050AA reporting if the recipient provides the borrower with a simplified statement by January 31, 2026 “indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan.”
- If this statement is properly provided, the IRS will not impose penalties under §§ 6721 or 6722 for 2025 reporting.
- The transitional guidance provides several options for providing the statement to borrowers, such as:
- Through an online account portal that is easily accessible
- A regular monthly statement
- An annual statement
- Or by other similar means designed to provide accurate information on the 2025 interest received on a specified passenger vehicle loan.
Qualified Passenger Vehicles
The law only applies to loans for the purchase of a new, qualifying passenger vehicle. Vehicles must meet all the following criteria:
- Original use starts with the taxpayer (i.e., it’s a new vehicle)*
- Final assembly in the United States:
- Made for primary use on public roads
- Weighs less than 14,000 pounds
- Categorized as a motor vehicle under the Clean Air Act
- Has at least two wheels (cars, SUVs, pickup trucks, motorcycles, etc.)
The reporting requirement does not apply to:
- Used car purchases
- Equity or cash-out auto loans
- ATVs, RVs, boats, and other non-road vehicles
* If a qualifying vehicle loan is later refinanced by the same owner, interest paid on the refinanced amount is generally eligible for the deduction
Final assembly in the United States
The IRS has provided the following information regarding whether finally assembly of a vehicle is in the United States:
- The location of final assembly will be listed on the vehicle information label attached to each vehicle on a dealer’s premises.
- Alternatively, taxpayers may rely on the vehicle’s plant of manufacture as reported in the vehicle identification number (VIN) to determine whether a vehicle has undergone final assembly in the United States.
- The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) provides plant of manufacture information.
- Taxpayers can follow the instructions on that website to determine if the vehicle’s plant of manufacture was located in the United States.
Action Items for Credit Unions
- Identify Non-Covered Loans: Start by excluding loans that clearly do not meet the vehicle criteria listed above. This can help reduce your review workload.
- Flag Likely-Qualifying Vehicles: Use the information provided above to determine which vehicles likely qualify for the interest rate deduction
- Plan for 2025 Interest Rate Statement: If you will provide a simplified interest statement for 2025, decide how you will make the statement available to borrowers
- Consult Your Core Provider: Begin discussions with your core processing vendor about how reporting can be supported for tax year 2026.
Advocacy in Action
Your credit union league’s advocacy team engaged in extensive discussions with the U.S. Treasury Department about the operational challenges posed by the new IRS reporting requirement. Their efforts played a key role in prompting the issuance of this interim guidance.
