New Interim Measures for Auto Loan Interest Reporting

The Treasury Department, along with the IRS, has rolled out new interim measures to assist companies and lenders in adapting to recent reporting requirements. These changes relate to interest payments on auto loans initiated under President Trump’s One Big Beautiful Bill (OBBB).

These interim measures include options for interest deductions, penalty reductions, and simpler reporting methods. This provides more flexibility for individuals as they navigate the new IRS reporting rules during this adjustment period.

Why This Matters

This transitional relief represents a significant tax shift under OBBB, which was signed into law on July 4. The new policy enables U.S. taxpayers to deduct interest on eligible new car loans. It’s a change likely to impact countless car buyers and the financial institutions serving them. Given that more than 80% of new car sales in the U.S. involve loans, these new provisions could influence tax filings, car affordability, and lender operations nationwide. The auto market plays a crucial role in consumer spending and borrowing, so this is worth paying attention to.

Key Information

According to Notice 2025-57, the Treasury Department and IRS are offering temporary relief for those required to report auto loan interest payments. Eligible taxpayers can deduct interest on loans for vehicles manufactured in the U.S. as long as the loans started after December 31, 2024, but before January 1, 2029.

Main provisions:

• Lenders must file a return and provide a Borrower Statement indicating the total interest received on qualifying passenger car loans.
• Eligible vehicles encompass cars, SUVs, minivans, pickup trucks, vans, and motorcycles weighing less than 14,000 pounds that were assembled in the U.S.
• For 2025, lenders can meet reporting requirements via an online portal, statement, or similarly accessible format. In these cases, the IRS will not impose penalties for failing to submit a traditional information return.
• This rule is applicable only for lenders who receive at least $600 in interest annually from borrowers.

Public Reactions

A recent IRS press release states, “Additionally, the IRS will not penalize lenders for failing to declare information or file payee statements if they have met the reporting requirements outlined in the notice.”

Looking Ahead

This transitional period is designed to give lenders ample time to upgrade their technology and compliance procedures before stricter reporting standards roll out in 2026. More guidance from the IRS is anticipated soon. Borrowers who wish to claim deductions from 2025 to 2028 should keep their Vehicle Identification Number (VIN) and proof of U.S. assembly as evidence of eligibility.

Both taxpayers and financial institutions are encouraged to stay updated with the IRS as the final rules are formed and released.