P.L. 119-21 (known as the "One Big Beautiful Bill" or the new law herein), enacted on July 4, 2025, introduces a new reporting requirement for financial institutions, auto lenders and servicers that finance automobile purchases (i.e., persons receiving interest from borrowers and herein, lenders). While applying only for calendar years 2025 through 2028, the new reporting obligation introduces operational and strategic considerations that lenders will likely want to address sooner rather than later.

Understanding the new requirement

The new law amends IRC Section163(h) to allow individuals to deduct interest on certain car loans for calendar years 2025 through 2028. To substantiate the deduction, the law also requires lenders to report interest payments received totaling $600 or more during the calendar year. Reporting is required even if the deduction is phased out based on the borrower's adjusted gross income.

The first filing deadline for this new information report will likely be January 31, 2026, for interest paid during calendar year 2025.

In complying with this new information reporting requirement, lenders will need to determine if the new vehicles covered by the loans:

• Are finally assembled in the United States as defined in 49 C.F.R. §§ 583.4(b)(4) and 583.6(a)(3)
• Are secured by a first lien
• Are purchased for personal use
• Meet the definition of an applicable passenger vehicle

The manufacturer's label, already required on all new vehicles, will likely serve as the authoritative source for final-assembly location. The National Highway Traffic Safety Administration also publishes an annual report specifying where final assembly of a vehicle occurs.

Key considerations for implementation

In preparing to implement the new reporting requirement, lenders should consider the following:

1. Data management and system readiness

To meet the reporting requirement, lenders must ensure their systems can capture and store the necessary information, including the borrower's name and address, vehicle identification number (VIN) and other vehicle information, loan origination date, and outstanding principal and interest on the loan. Ensuring that the system captures the correct data reduces the number of reporting corrections and mailings that are returned-to-sender.

Data management systems must also be capable of distinguishing between personal-use and business-use loans, as well loans that do or do not require interest reporting.

Lenders should integrate this data into their origination and servicing platforms and implement validation protocols to ensure accuracy.

2. Process efficiency and technology alignment

To avoid operational disruption, lenders should consider:

• Automating data capture and validation using existing loan origination systems
• Integrating third-party vehicle data services to verify final assembly and VINs
• Aligning IT and compliance teams early to scope and test system updates

Making these adjustments may mean modernizing legacy workflows to improve data governance. Given the potential short-term nature of this legislation, lenders should evaluate whether to build or buy these capabilities based on their long-term technology strategy.

3. Customer communication and training

To assist borrowers in understanding the tax benefit and how to claim it, lenders should consider providing clear, proactive communication about eligibility for the benefit and supporting documentation. Training will likely be needed for customer service and compliance teams so they can better handle inquiries and support accurate reporting.

4. Cost analysis

Implementing the new requirement will involve:

• System upgrades
• Staff training
• Compliance reviews
• Potential third-party vendor support

However, the cost of non-compliance — IRS penalties, reputational damage, and customer dissatisfaction — could be significantly higher. Lenders that act early and communicate clearly will be better positioned to manage risk and build trust.

Conclusion

This new information reporting requirement is more than a compliance task — it's a cross-functional initiative that touches tax, IT, operations and the customer experience. By leveraging existing regulatory definitions and vehicle data, lenders can implement the requirement efficiently and strategically.