New Car-Loan Interest Rules: What You Need to Know (and How It Could Affect You)

Now that the IRS and Treasury have issued Notice 2025-57 providing transition relief for 2025 reporting of car-loan interest under the One Big Beautiful Bill, it’s a good time to understand how this may affect your taxes — whether you’re a creator, business owner, professional or high-net-worth individual.

What’s changed?

Under the OBBBA:

• For tax years beginning after December 31, 2024 (i.e., starting 2025), certain interest paid on a qualified passenger-vehicle loan may be deductible.

• At the same time, lenders (or other recipients of at least $600 of interest) are required to file information returns and provide statements to borrowers showing interest received on these loans.

• Notice 2025-57 gives transition relief for 2025 by allowing lenders to satisfy their reporting obligations by making the interest statement available via: an online portal, regular monthly statement, annual statement, or similar means. Penalties for 2025 are waived if qualified.

Who this could affect

This change matters for many of our clients:

• YouTubers, TikTokers, filmmakers, and other creators who may purchase a new vehicle for personal (or mixed) use.

• Shopify store owners, Amazon sellers or other online commerce entrepreneurs who finance a vehicle and want to evaluate tax-savings.

• Dental practices, medical practices, doctors and dentists who may also finance vehicles and want to understand the difference between business-use vehicle deductions and this personal-vehicle interest deduction.

• High-net-worth individuals looking for any legitimate deduction under the OBBBA changes.

What qualifies (and what doesn’t)

To benefit from the deduction, the loan and vehicle must meet specific criteria (per OBBBA + guidance):

• The vehicle must be a new vehicle, its original use must begin with you.

• It must be a “qualified passenger vehicle”: car, minivan, van, SUV, pickup or motorcycle, with a gross vehicle weight rating (GVWR) less than 14,000 pounds, final assembly in the U.S.

• The loan must be originated after December 31, 2024 and before January 1, 2029.

• The vehicle must be for personal use (not a commercial fleet or purely business-use vehicle).

• There may be income limits or phase-outs (for example, if your MAGI exceeds certain thresholds) meaning high-income taxpayers may get reduced benefit.

Why business-owners and professionals should pay attention

Even though this is a “personal vehicle” interest deduction, business owners and professionals often confuse it with business-vehicle deductions. Here’s what to keep in mind:

• If you use a vehicle primarily for business, you likely already deduct business use via normal business-vehicle rules (Section 179, bonus depreciation, etc.). This new deduction is separate and targeted at personal-use vehicles financed post-2024.

• If you’re a creator or business owner and you finance a vehicle for both personal and business use, you’ll want to analyze which portion qualifies under this new rule and what belongs under the business deduction rules.

• Documentation and vehicle eligibility matter. You may need to show the loan interest amount, vehicle VIN, original use, final assembly, and any lender statement showing the interest.

• For lenders: for 2025 only, transition relief means lenders must provide a statement but are not yet penalized for missing the full information-return obligation. As borrowers/taxpayers, you should request or retain such a statement for your records.

Example Scenarios

Example 1 – Creator Use
A TikToker purchases a new U.S-assembled SUV in March 2025 for personal and creator travel use. Loan interest paid in 2025 is $4,500. The TikToker’s MAGI is $90,000, under the income threshold. They may be eligible to deduct up to $4,500 of the interest on their 2025 return (filed in 2026) if all criteria met.

Example 2 – Business/Personal Mix
A dentist finances a new pickup truck (GVWR under 14,000 lbs) in 2025. They intend 70% business use, 30% personal. The business-use portion will be handled under business deduction rules, but the personal-use portion might qualify for this interest deduction (if the vehicle meets the personal use and eligibility criteria). Proper allocation and documentation are critical.

Example 3 – Online Commerce Owner
An Amazon store owner buys a new minivan (U.S. assembled) for family and occasional business-use trips in late 2025. Loan interest is $6,000. Since the vehicle is partly personal, they consider using the deduction for the personal-use portion (assuming eligibility) while documenting the business-use portion separately in their business tax filings.

What You Should Do Now

• Review any vehicle loans originated after December 31, 2024 and check whether the vehicle qualifies (new, U.S. assembled, personal use, etc.).

• Request a lender’s statement showing interest paid for the year and retain it for tax documentation.

• Separate business-use vs personal-use vehicles and vehicle interest to ensure correct tax treatment.

• Consult your CPA or tax professional (especially if you’re a creator, Shopify/Amazon business, or professional with complex income) to analyze eligibility, phase-outs, and documentation.

• Stay aware of reporting requirements for lenders in 2025 (transition relief) and that future years may have stricter reporting.

• Plan your vehicle purchase timing and loan structure if you believe you can benefit from this rule.

How Velin & Associates, Inc. Can Help

As your trusted tax partner for creators (YouTubers, TikTokers), online commerce (Shopify, Amazon sellers), filmmakers, medical and dental practices, and high-net-worth individuals, we specialize in:

• Identifying vehicle-loan interest deduction opportunities under OBBBA

• Allocating business vs personal use of vehicles correctly

• Ensuring proper documentation (VINs, loan statements, interest amounts)

• Coordinating with lender statements and future reporting obligations

• Integrating this new vehicle-loan interest rule into your broader tax and business-use strategy

Whether you’re planning a new vehicle purchase for 2025 or want to understand how this change affects next year’s taxes, we’re here to help you make informed decisions and maximize your tax position.

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

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