September 11, 2026
Public Law No. 119-21, otherwise known as the "One, Big, Beautiful Bill Act," became effective on July 4, 2025. The law includes a new income tax interest deduction for tax years 2025 through 2028, which permits taxpayers to deduct up to $10,000 of "qualified passenger vehicle loan interest" from taxable income for indebtedness incurred after December 31, 2024. On September 8, 2026, the Internal Revenue Service published its final rule regarding the deduction, including new reporting requirements for those who receive $600 or more in interest on qualifying vehicle loans in any calendar year. The regulations are effective on November 9, 2026.
The final rule clarifies that interest is "qualified passenger vehicle loan interest" only if the indebtedness is a "specified passenger vehicle loan" (defined as purchase money indebtedness) secured by a first lien on an "applicable passenger vehicle." Applicable passenger vehicles are those that are manufactured primarily for road use, have at least two wheels, are treated as motor vehicles under Title II of the Clean Air Act, have a gross weight rating of less than 14,000 pounds, are finally assembled in the United States, and are of the following types: car, minivan, van, sport utility vehicle, pickup truck, or motorcycle. The new regulations provide additional guidance on these qualifications, including when a security interest is deemed to be a first lien, whether interest on ancillary products qualifies for the deduction, how to treat refinancing of a specified passenger vehicle loan, and how to determine whether final assembly of the vehicle occurs within the United States.
Persons who receive 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 (in a form prescribed by the IRS). The information return must include the name and address of the payee, the amount of interest, the outstanding principal balance of the obligation as of the calendar year, the date of origination of the loan, and information about the vehicle securing the loan.
Those persons who are required to file an information return must also provide to each individual whose name is required to be included in the return a written statement that includes certain information prescribed by law.
Any person who fails to file information returns or furnish payee statements as required is subject to the penalties under Sections 6721 and 6722 of the Internal Revenue Code.
Prior Alert:
New Vehicle Financing Interest Disclosure Deadline Approaches