The Treasury and the Internal Revenue Service have provided transitional guidance for businesses required to report car loan interest under the recent tax reform.
A “qualified passenger vehicle” is a car, minivan, van, SUV, pick-up or motorcycle with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the U.S.
Under the new guidance, the IRS will consider that lenders have met their reporting obligations for interest received on a qualified passenger car loan in 2025 if they make a statement available to the buyer indicating the total amount of interest received. Specifically, lenders can meet their reporting requirements by making this total amount of interest available:
- On an online portal that the buyer can easily access;
- In a regular monthly statement;
- On an annual statement provided to the buyer; or,
- By other similar means designed to provide accurate information to the buyer regarding interest received.
The IRS will not impose penalties on lenders for a failure to file information returns and provide payee statements if they satisfy their reporting obligations as described in the notice.
This new tax benefit allows certain taxpayers to deduct interest paid on a qualified passenger vehicle loan during a taxable year beginning after Dec. 31, 2024, and before Jan. 1, 2029, provided the loan is incurred after Dec. 31, 2024, and the vehicle is purchased for personal use. Businesses that receive from any individual interest of $600 or more for any calendar year on a qualified passenger vehicle loan must comply with the new reporting requirements.
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