The One Big Beautiful Bill Act's Car Loan Interest Deduction

The One Big Beautiful Bill Act (the "Bill") was passed by both chambers of Congress on July 3, 2025 and was signed into law on July 4, 2025. Section 70203 of the Bill establishes a temporary tax deduction for passenger vehicle loan interest and Section 6050AA establishes new reporting requirements for businesses receiving $600 or more in interest on certain qualifying vehicle loans. Most importantly for credit unions, these sections are already in effect. In fact, the interest deduction and reporting requirements apply to any applicable loan made after December 31, 2024. That's right, you may have made a qualifying loan without realizing it. Which means you now have reporting requirements for those already made loans that you didn't know you had to pay special attention to.

This blog will go over what the car loan interest deduction is and its impact on credit union. For a more detailed discussion, the Compliance team has created FAQs for America's Credit Unions' members.

Under the Bill, consumers are permitted to take an "above-the-line" tax deduction for qualified passenger vehicle loan interest for tax years 2025-2028. This means, a taxpayer can take the deduction even if they are taking the standard deduction and not itemizing. It's an every man's deduction. "Qualified passenger vehicle loan interest" means any interest which is paid or accrued during the taxable year by the taxpayer after December 31, 2024, for the purchase of an "applicable passenger vehicle" for personal use that is secured by a first lien on that vehicle.

Applicable passenger vehicle means any vehicle:

"(i) the original use of which commences with the taxpayer;

(ii) which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails);

(iii) which has at least 2 wheels;

(iv) which is a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle;

(v) which is treated as a motor vehicle for purposes of Title II of the Clean Air Act; and

(vi) which has a gross vehicle weight rating of less than 14,000 pounds."

The Bill excludes any vehicle the "final assembly" of which did not occur within the United States. In sum, to qualify for the deduction, the vehicle a member is purchasing must be new (not used) for personal use (i.e., non-business, non-commercial) and have a final assembly in the USA. There are other limitations, such as an income limitation and limitations on refinancings, which is discussed further in our FAQs.

So, what is a credit union required to do? Under section 6050AA, a credit union that receives $600 or more in interest on certain qualifying vehicle loans must provide a form, likely similar to a form 1099 or 1098, to the Internal Revenue Service (IRS) reporting the interest collected. Credit unions are also required to provide a written statement to the borrower. The Bill requires the Secretary of the Treasury and the IRS to create a form. The form has not been created; however, when the form is released, we will update our FAQs.

The following information is required to be contained within the form:

1. The name and address of the individual;
2. The amount of such interest received for the calendar year;
3. The amount of outstanding principal on the specified passenger vehicle loan as of the beginning of such calendar year;
4. The date of the origination of such loan;
5. The year, make, model, and vehicle identification number of the applicable passenger vehicle which secures such loan (or such other description of such vehicle as the Secretary may prescribe); and
6. Such other information as the Secretary may prescribe.

The written statement to the borrower must contain substantially the same information contained on the standardized form, as well as, contact information for the credit union.

As noted above, this requirement applies only to qualified loans for qualified vehicles and applies retroactively. Unfortunately, we don't have a list of qualified vehicles. This likely means credit unions will have to go through their car loans to determine what loans qualify. Considering we are more than halfway through the year, credit unions may want to start going through their vehicle loans to determine which ones qualify. While the IRS may publish a list of qualified vehicles that simplifies the process, we don't have it yet and nothing is certain. Further, credit unions may want to consider ways to implement procedures into their auto loan process to help determine if a vehicle is an applicable passenger vehicle.

For more information on the deduction and requirements, credit unions can review our FAQs on the deduction and reporting requirements. Further, America's Credit Union members can also contact the Compliance team at compliance@americascreditunions.org.