The IRS has issued guidance (Notice 2025-57) on how financial institutions, auto lenders and servicers that finance automobile purchases (i.e., persons receiving interest from borrowers and herein, lenders) can comply with the new IRC Section 6055AA reporting requirement on 2025 interest payments for car loans under the "One Big Beautiful Bill Act" (P.L. 119-21, OBBBA) (see Tax Alert 2025-1424).

The Notice allows lenders to fulfill the 2025 reporting requirements by providing a statement to the individual that shows the total amount of interest during the 2025 calendar year on the car loan.

OBBBA requirement

The OBBBA amended IRC Section163(h) to allow individuals to deduct interest on certain car loans for calendar years 2025 through 2028. The deduction applies to loans on specified passenger vehicles, which generally means new, personal use vehicles that had a place of final assembly in the United States. To substantiate the deduction, the law requires lenders to report under IRC Section 6055AA 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.

In July 2025, the IRS issued FS-2025-03 (July 14, 2025), stating that transition relief for tax year 2025 would be provided and detailing how to determine a vehicle's place of final assembly (see Tax Alert 2025-1628).

Transition relief

Under Notice 2025-57, lenders can meet the IRC Section 6050AA reporting requirements for calendar year 2025 by providing a statement of total interest received on specified passenger vehicle loans to individuals by January 31, 2026.

The Notice provides a few examples of how the statement can be provided, including through:

• An online account portal that the individual can easily access
• A regular monthly or annual statement that is provided to the individual
  Or
• Other similar means designed to provide accurate information

No penalties for failure to file with the IRS or furnish to the taxpayer under IRC Sections 6721 and 6722 will apply if these reporting obligations are properly met for 2025.

Implications

Several technical issues were not addressed in Notice 2025-57, including whether the interest associated with protection or service plans that are included in the loan need to be excluded for reporting or deduction purposes. Perhaps the Notice's reference to IRC Sections 6721 and 6722 provides relief for incorrect filing in the absence of guidance on these nuanced issues. In addition, the Notice states that reporting is only for specific passenger vehicles and does not provide explicit relief if the lender reports loans that do not qualify.

The Notice allows electronic delivery of the transitional relief interest statement, in addition to other means such as paper mailing. In future years, when the IRS requires reporting on a Form 1098, the consent to electronic delivery requirements under Treas. Reg. Section 1.6055-2(a)(2) will likely apply. Lenders should consider leveraging the transitional period to obtain electronic consents to reduce print/mail volumes for 2026 reporting.

The IRS has also released draft Schedule 1-A to Form 1040 for individuals to claim the interest deduction. The schedule requires the individual to report the interest amount and the VIN. Although the Notice does not require lenders to include the VIN on the transitional relief interest statement, they may want to include it to improve the individual's experience.