Key Takeaways:
- IRS Notice 2025-57 delays the filing of Form 1098-VLI filing for auto loan interest. However, lenders must still send 2025 interest statements to their borrowers.
- Additionally, lenders must deliver to their customers all 2025 vehicle loan interest statements by January 31, 2026, using the online portal, monthly statements, or a similar format.
- OBBB allows individuals to deduct up to $10,000 in qualified interest on personal-use auto loans for vehicles assembled in the United States.
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The IRS recently issued Notice 2025-57, giving lenders some breathing room as they prepare new reporting requirements tied to vehicle loan interest under the One Big Beautiful Bill Act (OBBBA). This transition relief helps to temporarily ease the immediate administrative load for financial institutions as they ramp up for compliance.
Starting in 2025, taxpayers can deduct up to $10,000 in interest on loans for certain passenger vehicles that undergo final assembly in the U.S., if they vehicle was purchased for personal use. The deduction applies to tax years beginning after December 31, 2024, and before January 1, 2029. To support this deduction, OBBBA introduces new lender responsibilities, including borrowers with specific statements and filing corresponding information with the IRS.
Relief Highlights from Notice 2025-57
Under the transitional relief in Notice 2025-57, the IRS has delayed the requirement for direct IRS reporting for calendar year 2025. For now, lenders will be treated as compliant as long as they give borrowers a statement showing the interest paid in 2025 by January 31, 2026. This can be delivered through familiar channels, like:
- Online account portals
- Monthly or annual statements
- Printed notices
- Other widely accepted means
Providing this statement fulfills both the borrower notification requirement and the IRS reporting requirements for the 2025 tax year. Although a draft Form 1098-VLI has been released, it is designated for 2026, confirming that the IRS will not require or accept filings for 2025.
Who is Affected?
The new rules apply to any business that receives $600 or more in interest each year from an individual borrower on a qualified vehicle loan. This includes:
- Auto finance companies
- Banks and credit unions
- Captive lenders
- Fintech lenders offering vehicle financing
These organizations should begin reviewing their systems, data collection processes, and reporting workflows now to make sure they’re ready to meet the OBBB requirements.
Key Considerations for Lenders
Although Notice 2025-57 offers temporary penalty relief, it doesn’t clarify how lenders should not determine what qualifies as eligible interest or whether a particular loan meets the law’s eligibility requirements. For now, lenders are expected to make reasonable judgments based on their interpretation of the statute.
Given the scope and impact of the new reporting obligations, organizations should start planning around several key areas:
- Data readiness: Begin collecting and organizing interest payment data as of January 1, 2025.
- Loan qualification tracking: Implement procedures to identify qualifying loans (e.g., vehicle use, assembly location, purchase date).
- Communication planning: Develop borrower communication strategies to share information clearly and on time.
- Tech and automation: Evaluate whether current platforms can handle the data requirements or if automated solutions are necessary.
Looking Ahead
With the IRS expected to release additional guidance and finalize Form 1098-VLI by 2026, lenders have a brief runway to prepare before formal filing obligations begin. This transition period should be viewed as an opportunity to:
- Strengthen internal controls
- Invest in compliance tools
- Educate internal teams and borrowers on the new deduction
By taking early, proactive steps, lenders can help reduce compliance risk and position themselves for smoother reporting once the full filing obligations take effect.
How MGO Can Help: Planning for OBBB Compliance
MGO’s audit team and transaction advisory team support financial institutions, fintech lenders, and automotive finance companies in addressing evolving federal and state tax reporting obligations. We assist clients by analyzing data capture workflows, evaluating systems readiness, and advising on compliant approaches when definitive regulatory guidance is still forthcoming.
For lenders impacted by the OBBB reporting rules, we help develop practical solutions to simplify compliance and prepare for expanded IRS reporting in 2026. Contact us to learn more.