NEWS: The IRS on Tuesday issued new guidance for lenders about reporting interest on certain auto loans while the agency determines how to implement a new federal law that lets taxpayers deduct the interest.
The so-called “One Big Beautiful Bill” introduced the deduction which we explained in this Compliance Courier. The law created a new reporting requirement for businesses, including credit unions, that receive $600 or more in interest on loans originated after Dec. 31, 2024, for the purchase of certain passenger vehicle for consumer use. A qualified passenger vehicle is 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 U.S.
The new IRS guidance gives lenders some relief this year from having to provide statements to borrowers showing the total amount of interest received on those loans. Under the guidance, lenders can meet their reporting obligations for interest received on a qualified passenger car loan in 2025 by making a statement available to the buyer “on or before Jan. 31, 2026, indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan.” A credit union “can make this statement available to the individual via, for example, an online account portal that the individual can easily access, a regular monthly statement, an annual statement that is provided to the individual, or by other similar means designed to provide accurate information to the individual regarding the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan.”
The IRS said it would not impose penalties on lenders who fail to file formal information returns about the loans if they follow the guidance. This is reiterated in this America’s Credit Unions compliance blog (login required):
One key item to keep in mind is that while the transitional guidance does not provide guidance on reporting interest to the IRS, just to the individual borrower/s, it does state that following the transitional guidance satisfies a lender’s reporting requirements. This seems to indicate that the IRS does not want an influx of annual statements from lenders but would rather prefer lenders use an official form whenever it is created and published for use.
This guidance is meant to be a stopgap while the IRS updates annual forms that will allow lenders to report loans directly to the agency. In addition, the IRS will need to adopt formal regulations to address the car loan interest deduction, and it is not clear when they will do that.
Compliance Roundtable – November 5 (Webinar)
Join The League’s compliance team as they lead a discussion on the latest changes in regulations and need to know information to keep your credit union in compliance. You can find more information or register on our website.