The IRS announced on Tuesday (in Notice 2025-57) that it’s giving lenders extra time — and penalty relief — as they adjust to new car loan reporting requirements set by a recent tax law.
This temporary “transition relief” applies for the 2025 tax year. It’s designed to give lenders time to update their systems and for the IRS to update its forms and software before fully rolling out the new rules.
The One Big Beautiful Bill Act
New tax law referred to as The One Big Beautiful Bill Act, lets some taxpayers deduct interest paid on car loans between 2025 and 2028, but only if the vehicle meets certain qualifications.
Here’s a quick summary of the key points:
- The qualified passenger vehicle must have final assembly in the United States.
- The loan must be for a personal-use vehicle (not business).
- The interest deduction is capped at $10,000 per year.
- The deduction starts to phase out for people earning more than $100,000 (or $200,000 if married and filing jointly).
Here is Where the IRS is Making Things Easier for 2025
Normally, lenders would need to send detailed forms, much like the Form 1098 Mortgage Interest Statement, to both the IRS and borrowers showing things like:
- The total interest paid on a qualified car loan,
- The loan’s start date, and
- The balance owed at the beginning of the year.
But for 2025, the IRS says lenders will meet their reporting obligations if they simply provide borrowers with a statement showing the total amount of interest received. They can share this information through an online account portal, a regular monthly statement, an annual statement or by any other method that communicates the interest paid in 2025.
What Vehicles Qualify
A qualified passenger vehicle includes:
- Cars, SUVs, minivans, vans, pickup trucks, and motorcycles,
- With a gross vehicle weight under 14,000 pounds, and
- Final assembly of the vehicle took place in the United States.
The deduction only applies if the loan starts after December 31, 2024, and the car is bought for personal use.
What This Means for You
If you buy a qualifying vehicle and pay interest on your car loan starting in 2025, you may be able to deduct that interest on your taxes — up to the annual limit of $10,000.
Your lender will provide the information you need, and thanks to this temporary relief, they’ll have flexibility in how they report it for 2025.
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