The IRS announced anticipated transition relief guidance for both lenders and borrowers regarding the new below-the-line, non-itemized car loan interest deduction enacted by OBBBA. (IRS Notice 2025-57) This notice follows on the heels of the IRS releasing draft Form 1098-VLI, Vehicle Loan Interest Statement, on October 16, 2025.
Under this new provision, lenders have an information reporting requirement similar to the requirement for mortgage lenders to provide Form 1098, Mortgage Interest Statement, to borrowers by January 31 of the following tax year. The new Form 1098-VLI, must be issued if the taxpayer pays at least $600 in qualifying interest during the calendar year.
Because the IRS has only recently issued new Form 1098-VLI in draft form, Notice 2025-57 treats 2025 as a transition year and provides that lenders have met their reporting obligation for interest received on a qualified passenger car loan in 2025 if they make a statement available to the buyer indicating the total amount of interest received during 2025. Lenders can provide the statement via:
- An online portal that the buyer can easily access;
- A regular monthly statement;
- An annual statement that is provided to the buyer; or
- Any other similar means.
For individual taxpayers seeking to claim the new deduction for car loan interest, they can rely on the lender-provided information when claiming the deduction, even without receiving Form 1098-VLI.
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