IRS Announces Temporary Relief for Americans Dealing With Car Loan Tax Changes
Leland Terry
Published Jan 12, 2026
The U.S. Department of the Treasury and the IRS have put in place temporary new rules to help businesses and lenders adjust to recent changes about how interest on car loans should be reported.
These changes come as part of President Donald Trump’s “One Big Beautiful Bill Act” (OBBB), which was signed into law on July 4.
Key Points:
- What’s New? Starting soon, people in the U.S. can deduct the interest they pay on certain new car loans from their taxes. This affects millions of car buyers and the banks or companies that give out car loans.
- Why Is This Important? More than 80% of new vehicle sales in America are financed with loans. These new rules could change how taxes are filed and might make buying cars more affordable for many people.
Details About the Temporary Relief:
- The IRS is giving lenders more flexible options for reporting interest payments on car loans this year. For now, lenders can share this information through online portals and statements. If they follow these steps, they won’t be penalized for not using the usual reporting forms.
- To qualify, the loans must be for passenger vehicles like cars, SUVs, minivans, pickup trucks, vans, or motorcycles (weighing under 14,000 pounds). The vehicle must be assembled in the United States.
- The new rules apply to loans started after December 31, 2024, but before January 1, 2029.
- The rule only affects lenders who receive at least $600 in interest per year from an individual borrower.
What People Are Saying:
The IRS said they won’t punish lenders who use these temporary reporting methods, as long as they follow the specific guidance.
What Happens Next?
These relaxed rules will give lenders time to update their systems before tougher standards kick in for 2026.
Borrowers who plan to deduct their car loan interest (from 2025 through 2028) should keep records, like Vehicle Identification Numbers (VINs) and proof that their car was assembled in the U.S., to show they qualify.
Both taxpayers and lenders should watch for more updates from the IRS as final rules are decided.
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