IRS Provides Guidance on Car Loan Interest
The One Big Beautiful Act added many tax deductions for individuals, including interest on a qualified vehicle purchased with a loan incurred after December 31, 2024.
If the taxpayer’s modified adjusted gross income is $100,000 or less ($200,000 for joint filers), they can deduct up to $10,000 of interest paid on the a vehicle loan for a car, minivan, van, SUV, pick-up truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds that has undergone final assembly in the United States.
With this deduction allowed, it can be difficult for the taxpayer to calculate the amount of interest that can be deducted. Because of this, the taxpayer must receive in a form provided by the Secretary of the Treasury the following from the recipient of the interest if the recipient received $600 or more:
- 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 principle on the loan at the beginning of the calendar year
- The date of the origination loan
- The year, make, model, and vehicle identification number of the vehicle
- Other information the Secretary may prescribe
Due to the hardship of obtaining and sending this information to the taxpayer, the Internal Revenue Service said the recipient of the interest can satisfy its 2025 reporting requirement by:
- Making a statement to the taxpayer indicating the amount of interest received
- Issuing the statement before January 31, 2026
- Making the statement available via (a) an online account portal, (b) a regular monthly statement, (c) an annual statement provided to the individual, or (d) a similar means
This change will significantly reduce the first-year reporting burden for auto loan interest recipients.
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