IRS Issues Transitional Guidance for 2025 US New Car Loan Interest Reporting

The IRS has issued Notice 2025-57 to provide transitional guidance for the new car loan interest reporting requirements under the One Big Beautiful Bill Act (OBBBA), effective for vehicle loans starting in 2025. This guidance offers relief by allowing lenders to meet reporting obligations through an annual statement, an online portal, or similar means that clearly show the total interest received on qualified passenger vehicle loans, thus avoiding penalties for failure to file detailed information returns in 2025. The deduction allows taxpayers to claim up to $10,000 in interest for new vehicles that are assembled in the United States and have a gross vehicle weight under 14,000 pounds, but it excludes used vehicles and those assembled abroad. Loans must be secured by a first lien on the vehicle and meet other criteria outlined in the law, with the deduction phased out at higher income levels. Most new vehicle sales, which are often financed at dealerships, will be affected, and borrowers will need to file a new Schedule 1-A with their 2025 tax returns to claim the deduction. This change, signed into law by President Donald Trump on July 4, 2025, is designed to ease the transition for lenders and borrowers while implementing the new tax benefits related to car loan interest.