Treasury, IRS provide guidance on the new deduction for car loan interest under the One, Big, Beautiful Bill

IR-2025-129, Dec. 31, 2025

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today provided guidance on the “No Tax on Car Loan Interest” provision enacted under the One, Big, Beautiful Bill.

The proposed regulations issued today relate to a new deduction for interest paid on vehicle loans incurred after Dec. 31, 2024, to purchase new made-in-America vehicles for personal use. This new tax benefit applies to both taxpayers who take the standard deduction and those who itemize deductions.

Who can take a deduction for interest on car loans

To help taxpayers take advantage of this new tax benefit, today’s guidance addresses important eligibility criteria, including:

• Providing rules relating to new vehicles eligible for the deduction, including for determining if the final assembly of a vehicle occurred in the United States;
• Providing rules for determining which vehicle loans qualify and the amount of interest paid on a loan that may be deductible;
• Providing rules for determining if a new vehicle is purchased for personal use; and
• Identifying taxpayers who can take the deduction and clarifying the $10,000 annual deduction limit.

What lenders need to know

The IRS previously announced transition guidance for certain lenders and other taxpayers receiving interest for vehicle loans in 2025. In general, those persons must file information returns with the IRS to report interest received during the tax year and other information related to the loan. These information returns enable taxpayers to claim the benefits of the vehicle loan interest deduction. To help lenders implement these information reporting requirements, the proposed regulations clarify:

• Which lenders and other interest recipients are required to report and the time and manner for this reporting; and
• What information must be included on the form provided to the IRS and to taxpayers.

More information

Treasury and IRS invite comments from the public on these proposed regulations by Feb. 2, 2026. Comments can be submitted through Regulations.gov and instructions can be found in the proposed regulations.

For more information, see One, Big, Beautiful Bill provisions on IRS.gov.