According to the Journal of Accountancy, the IRS recently issued proposed regulations regarding the temporary deduction of interest on a qualified passenger vehicle loan, a provision of the "One Big Beautiful Bill Act."

The proposed regulations will provide much-needed clarification regarding who can claim the deduction, as well as lenders, during this four-year period.

Under Section 163(h), exempted from the classification of personal interest for tax years 2025 through 2028 is the qualified passenger vehicle loan interest. The deduction is available for the payment of loans incurred after Dec. 31, 2024, to finance a new passenger vehicle assembled in the US that is secured by a first lien and used for a primary purpose other than business.

The annual limit of the deduction is $10,000 and phases out when a taxpayer has more than $100,000 in modified adjusted gross income, or $200,000 or more for a joint filer. Worth noting is that it is available to both itemizers and people who take the standard deduction.

The regulations provide a way to determine eligible applications and direct how it can be done through the vehicle identification number or final assembly data to determine that it is eligible. A vehicle must be intended to be used more than 50% for private use on the day of lending.

This notice also deals with obligations to report for lenders, further expanding upon the transition relief offered in Notice 2025-57. Lenders will be required to file new informational returns on Form 1098-VLI to include loan interest income, enabling correct taxable income deductions to be claimed by taxpayers.