IRS Provides Transitional Relief for 2025 Car Loan Interest Reporting Requirements

(Parker Tax Publishing October 2025)

The IRS will allow lenders who receive interest in 2025 on qualified passenger vehicle loans to satisfy reporting requirements under Code Sec. 6050AA by providing individuals with a monthly or annual account statement (as opposed to a Form 1098 or other official tax document) indicating the total amount of interest received in calendar year 2025. Lenders will be relieved of the requirement to provide the origination date of the loan and vehicle-specific information such as year, make, model, and vehicle identification number. Notice 2025-57.

Background

For tax years 2025 through 2028, the One Big Beautiful Bill Act (OBBBA) amended Code Sec. 163(h)(4) to allow taxpayers to deduct up to $10,000 of interest on debt incurred after December 31, 2024, for the purchase of certain personal use passenger vehicles. Such interest is designated "qualified passenger vehicle loan interest" (QPVLI).

Observation: The deduction for car loan interest is allowed regardless of whether the taxpayer itemizes or takes the standard deduction. It phases out for modified adjusted gross income exceeding $100,000 ($200,000 for joint filers).

Code Sec. 6050AA requires information reporting with respect to interest received on a specified passenger vehicle loan. This interest may be QPVLI that is deductible under Code Sec. 163(a). Under Code Sec. 6050AA(a), any person engaged in a trade or business (i.e., a "recipient") who, in the course of that trade or business, receives from any individual interest aggregating $600 or more for any calendar year on a specified passenger vehicle loan, must file an information return reporting the receipt of interest.

A "specified passenger vehicle loan" is indebtedness incurred by the taxpayer after December 31, 2024, for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use. The term "applicable passenger vehicle" is defined in Code Sec. 163(h)(4)(D).

Code Sec. 6050AA(b) provides that the information return filed by the recipient must be in the form prescribed by the Secretary of the Treasury or the Secretary's delegate and must contain:

the name and address of the individual from whom the interest was received;

the amount of interest received for the calendar year;

the amount of outstanding principal on the specified passenger vehicle loan as of the beginning of such calendar year;

the date of origination of such loan; and

the year, make, model, and vehicle identification number (VIN) of the applicable passenger vehicle which secures such loan.

The deadline for furnishing such a statement is January 31 of the year following the calendar year for which the return was required to be made.

Transitional Relief

The IRS stated that recipients of QPVLI may need additional time to make the necessary changes to their systems to comply with their new information reporting responsibilities under Code Sec. 6050AA. In addition, the IRS needs additional time to make necessary programming and form updates to implement Code Sec. 6050AA. The IRS also noted that individuals need information on how much interest they paid or accrued in 2025 in order to determine the amount of interest that may be deductible as QPVLI on their individual income tax returns for the 2025 tax year.

Under Notice 2025-57, the recipient may satisfy the reporting obligations under Code Sec. 6050AA for interest received in calendar year 2025 on a specified passenger vehicle loan by making a statement available to the individual on or before January 31, 2026, indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan. The interest recipient can make this statement available to the individual via, for example, an online account portal that the individual can easily access, a regular monthly statement, an annual statement that is provided to the individual, or by other similar means.

For a discussion of the deduction for car loan interest, see Parker Tax ¶83,523. For a sample client letter explaining the new tax break, see Sample Client Letter.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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