New IRS Reporting Requirement for Auto Loan Interest

The recent passage of H.R. 1 (One Big Beautiful Bill Act) creates a new IRS information return reporting obligation for credit unions. Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria.

Credit unions and other lenders must begin reporting specific information to the IRS and to borrowers for interest received from these qualified vehicle loans. This new requirement applies retroactively to vehicle loans originated after December 31, 2024, meaning many loans already on the credit union’s books may be affected.

Early Action Advised

Given the retroactive nature of this requirement, credit unions need to act quickly to catch up. Producing these information returns will likely be burdensome — especially determining which vehicles meet the criteria. However, there are practical steps credit unions can take now to prepare.

What Is Required?

If a credit union receives $600 or more in interest from an individual on a qualifying vehicle loan, they must file a return with the IRS, including:

• Name and address of the borrower.
• Total interest received during the year.
• Loan principal outstanding as of January 1.
• Loan origination date.
• Year, make, model, and VIN of the vehicle securing
  the loan.
• Other details as required by the IRS.

A written statement with this same information, plus the credit union’s contact details, must be sent to the borrower by January 31st annually — much like 1098s or 1099-INTs.

What Vehicles Are Covered?

The law only applies to loans for the purchase of a new, qualifying passenger vehicle. Vehicles must meet all of the following criteria:

• Original use starts with the taxpayer (i.e., it’s a new vehicle).
• Assembled 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).

Excluded Loans

The reporting requirement does not apply to:

• Refinances.
• Used car purchases.
• Equity or cash-out auto loans.
• ATVs, RVs, boats, and other non-road vehicles.

This should significantly narrow the list of loans credit unions need to review.

What Can Credit Unions Do Now?

Here are steps your credit union can take to prepare for compliance:

• 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: While awaiting a formal list of applicable vehicles from the IRS, credit unions can consult existing resources to identify vehicles most likely to qualify: Cars.com American Made Index or the Car Edge Cars Made in America in 2025.
• Update Loan Applications: Consider adding a question or creating an addendum to your loan application asking whether the vehicle was assembled in the United States.
• Coordinate with Indirect Lending Partners: Ensure partners flag applicable vehicles at origination.
• Consult Your Core Provider: Begin discussions with your core processing vendor about how the new data and reporting can be supported. If the IRS does not release a standardized form by early 2026, credit unions may be responsible for producing their own.

Looking Ahead

The IRS has authority to issue further regulations and safe harbors, and more guidance is expected as we approach year-end. In the meantime, America’s Credit Unions is preparing a letter to the Treasury Secretary to express concern over the burden this reporting places on credit unions.

A Strategic Opportunity

While compliance may be complex, this new law could also present a growth opportunity. The intent behind the law is to incentivize the purchase of new, American-assembled vehicles. Credit unions that can support and finance these loans efficiently may be well-positioned to benefit. By helping members understand which vehicles qualify and offering competitive financing, credit unions can play a meaningful role in boosting domestic auto sales while growing their auto loan portfolios.

For More Information

Access the ‘Compliance Hotline’

Your League-member benefits include the Compliance Hotline — providing exclusive access to dedicated compliance experts:

• 844-731-6072
• CANV@viclarityus.com

Using the above phone number and email address, you can gain access to a knowledgeable team that’s ready to address all your credit union’s compliance inquiries — promptly and efficiently. With the Compliance Hotline, you can proactively respond to impromptu questions and issues by getting clarity and insight on technical topics that normally slow you down. We want to help you unlock the full potential of your League membership by leveraging the resources and support you need to navigate the complex world of compliance effortlessly. We’re ALWAYS just a phone call or email away!

Additionally, other League-member compliance resources include:

• ViClarity
• CU PolicyPro
• ComplySight
• InfoSight
• CU Store
• Record Retention Guide
• GRC Technology Solutions

For more information, email Lisa Quaranta.

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