At a Glance
The new Qualified Passenger Vehicle Loan Interest (QPVLI) deduction creates meaningful tax benefits for individual borrowers, but it also introduces significant reporting obligations for lenders, dealers, and other businesses that receive new vehicle loan interest. Beginning with loans originated after December 31, 2024, recipients of qualifying interest on new passenger vehicle purchases must prepare for new information reporting requirements under the Internal Revenue Code (IRC). Although transitional relief applies for 2025, affected organizations should act now to understand what must be reported, how systems may need to change, and what compliance will look like once full reporting takes effect.
Contents
- Understanding QPVLI and Why It Matters
- Who Is Subject to the New Reporting Rules
- What Information Must Be Reported
- Timing and Filing Requirements
- Transitional Relief for Calendar Year 2025
- Penalties and Compliance Considerations
- Practical Implications for Dealerships and Credit Unions
- The Road Ahead
Understanding QPVLI and Why It Matters
The Qualified Passenger Vehicle Loan Interest (QPVLI) deduction was enacted as part of the One Big Beautiful Bill Act (OBBBA), which introduced a temporary tax benefit allowing individuals to deduct interest paid on certain personal-use passenger vehicle loans incurred to purchase new passenger vehicles. For tax years beginning after December 31, 2024, and before January 1, 2029, qualifying vehicle loan interest is excluded from the definition of nondeductible personal interest, provided the statutory requirements are satisfied.
From a borrower’s perspective, the deduction can reduce taxable income. From a lender’s or dealer’s perspective, however, the deduction is only meaningful if accurate interest information is reported. To support this new deduction, Congress created a parallel information reporting regime designed to give taxpayers and the IRS visibility into qualifying vehicle loan interest.
Who Is Subject to the New Reporting Rules
The reporting obligation applies broadly to any person or entity engaged in a trade or business that receives interest from individuals on qualifying passenger vehicle loans used to finance the purchase of new vehicles. This includes automobile dealerships that carry paper, captive finance companies, independent finance companies, and credit unions that originate or service consumer auto loans.
Reporting is required when total interest received from an individual borrower on a qualifying loan equals or exceeds $600 in a calendar year. Importantly, the obligation is tied to receiving the interest, not to whether the recipient considers itself a traditional “lender” for tax purposes.
What Information Must Be Reported
The new rules require more detailed disclosures than traditional interest reporting. In addition to identifying the borrower and total interest received during the year, recipients must track and report loan- and vehicle-specific data.
Required information includes the outstanding principal balance at the beginning of the year, the loan origination date, and identifying details for the vehicle securing the loan. These details are intended to confirm that the loan meets the statutory definition of a qualifying passenger vehicle loan, including that it is secured by a first lien and used for personal purposes.
For many organizations, this level of reporting will require coordination between loan servicing systems, dealership management systems, and tax reporting processes.
Timing and Filing Requirements
Once fully implemented, recipients will be required to file an annual information return with the IRS and furnish a corresponding statement to each borrower. Borrower statements must generally be provided by January 31 following the calendar year in which the interest was received.
The borrower statement must include not only the interest amount, but also key loan and vehicle details, along with contact information for the reporting entity. These deadlines mirror other common information reporting regimes, but the content requirements are more expansive.
Transitional Relief for Calendar Year 2025
Recognizing that many organizations need time to update systems and procedures, the Treasury Department and IRS have provided transitional relief for interest received during calendar year 2025.
For that year only, recipients may satisfy their reporting obligation by making a statement available to borrowers showing the total amount of qualifying vehicle loan interest received during 2025. This information must be accessible to the borrower by January 31, 2026, but it does not need to be provided on a new IRS-prescribed form.
Statements may be delivered through existing channels, such as online account portals, annual summaries, or periodic loan statements, as long as the information is clear and accurate. Organizations that follow this transitional approach will not be subject to information return or payee statement penalties for 2025.
Penalties and Compliance Considerations
Beginning with interest received after the transitional period, failure to comply with QPVLI reporting requirements may trigger penalties for late, incomplete, or incorrect filings, as well as for failing to furnish borrower statements on time.
As with other information reporting regimes, penalties may be waived if the failure is due to reasonable cause and not willful neglect. However, reliance on reasonable cause should not be viewed as a substitute for proactive compliance planning.
Practical Implications for Dealerships and Credit Unions
For automobile dealerships and credit unions involved in new vehicle financing, QPVLI reporting represents both a compliance challenge and an operational planning issue. Data elements required for reporting may reside in different systems, and existing processes may not capture all required information in a reportable format.
Organizations should evaluate whether current loan documentation, servicing platforms, and reporting workflows can support the new requirements. Early planning will be especially important for entities with high loan volumes or decentralized operations.
The Road Ahead
The QPVLI deduction and its related reporting rules are still evolving, but the direction is clear: lenders and dealers will be expected to provide detailed, timely information to both borrowers and the IRS. Now is the time to assess readiness, identify gaps, and develop a compliance roadmap.
Bart Haag joined ARB in 1996 and is a Principal with the firm. The growth of ARB’s Auto Dealership Group is a natural result of consistently anticipating the needs of dealerships and providing savvy, sensible and customized services at fair prices.
