The American Financial Service Association spotted that “long-awaited” regulations from the IRS and the Treasury Department involving the auto-loan interest deduction were published in the Federal Register this week.

According to the 31-page document, the regulations go into effect on Nov. 9 regarding the deduction for certain taxpayers for an amount up to $10,000 of qualified passenger vehicle loan interest.

The document also contains final regulations regarding new information reporting requirements for certain persons who, in a trade or business, receive from any individual interest aggregating $600 or more for any calendar year on a specified passenger vehicle loan, including applicable penalties for failures to file information returns or furnish payee statements as required.

Officials said these regulations affect taxpayers that may deduct qualified passenger vehicle loan interest, and also persons subject to these information reporting requirements.

In a blog post, AFSA said it “has been front and center” since the enactment of legislation establishing this new tax deduction.

“In consultation with our vehicle finance company members, we collected questions and suggestions to share with the Treasury Department and the IRS as they drafted regulations to implement the new tax deduction. We are grateful for Treasury and IRS’ engagement and collaboration as we worked to make a smooth launch for this new policy,” AFSA wrote.

“During our interactions with Treasury and the IRS, we stressed that a vehicle finance contract is a unified whole, and that it is infeasible for consumers and vehicle finance companies to report on components of the interest paid on vehicle finance contracts,” AFSA continued. “For example, if a consumer pays  interest on a vehicle finance contract in a given year, existing systems do not split that amount into the amount of interest on the vehicle purchase price, taxes and fees, voluntary protection products, or financed negative equity.

“When Congress wrote the law, it created a deduction from income tax for ‘any interest which is paid or accrued during the taxable year on indebtedness incurred by the taxpayer after December 31, 2024, for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use,’” AFSA went on to write.

“‘Any interest’” should mean any interest,” the association added.

AFSA also explained the regulations say that no deduction is available for interest attributable to financed negative equity.

“The ability to finance negative equity makes new car purchases possible for many consumers, and denying the deduction for this interest frustrates the Congressional intent behind its legislation. Singling out negative equity is also inconsistent with the statutory text,” AFSA wrote.

“AFSA is currently consulting with other trade associations and counsel regarding potential responses to the regulation,” the association went on to write.