The U.S. Department of the Treasury and the Internal Revenue Service have released proposed regulations on the “No Tax on Car Loan Interest” provision enacted as part of H.R. 1, the budget reconciliation bill.

H.R. 1 establishes a temporary federal income tax deduction for interest paid on certain passenger vehicle loans for tax years 2025 through 2028 and introduces new reporting requirements for credit unions and other lenders.

The IRS previously issued transition guidance for lenders and other taxpayers receiving interest on qualifying vehicle loans in 2025. In general, those persons must file information returns with the IRS to report interest received during the tax year, along with other loan-related information. The filings enable eligible taxpayers to claim the vehicle loan interest deduction.

To help lenders implement these new reporting obligations, the proposed regulations clarify:

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

Public comment on the proposed regulations must be submitted through Regulations.gov by Feb. 2, 2026.