On September 9, 2026 the Internal Revenue Service (IRS) finalized regulations regarding the interest rate tax deduction for certain new vehicle loans. This implements 26 U.S. Code § 6050AA, enacted by the One Big Beautiful Bill Act (OBBBA).
Bottom Line for Credit Unions
If your credit union receives $600 or more in interest per calendar year on a qualifying vehicle-secured consumer loan, you now have a statutory obligation to:
- File an information return with the IRS
- Furnish a written statement to the borrower (similar to existing Form 1098 mortgage interest reporting).
What Triggers Reporting
A loan must be a “Specified Passenger Vehicle Loan” (SPVL) which is generally, indebtedness:
- Incurred by an individual after December 31, 2024
- Secured by a first lien on the vehicle
- Used to purchase an “Applicable Passenger Vehicle” (APV): a car, minivan, van, SUV, pickup truck, or motorcycle, under 14,000 lbs GVWR, with final assembly in the U.S., and
- Purchased for personal use (>50% expected use by the borrower/family)
Can a Credit Union Furnish Information Returns for all Vehicle Loans?
No. Reporting is not required for all vehicle loans and should only be done loans meeting the SPVL definition.
Are All Interest Payments Received for a SPVL Reportable?
No. Negative equity rolled into a loan and amounts not “customarily financed” as part of the vehicle purchase, are excluded from the SPVL calculation.
New Form: 1098-VLI
Interest recipients must file Form 1098-VLI (and furnish a copy to the borrower) reporting:
- Payor of record’s name, address, and TIN
- Interest received for the calendar year
- Outstanding principal as of the beginning of the calendar year
- Loan origination date and date acquired (if loan was purchased/transferred)
- Year, make, model, and VIN of the vehicle
The borrower statement must also include a required legend noting the amount reported may exceed what the borrower can actually deduct (due to the $10,000 cap and MAGI phaseout).
What Are the Filing Deadlines for the New 1098-VLI
- To the IRS (Electronic): March 31 (must be filed electronically via the IRS IRIS system)
- To the IRS (Paper): February 28
- To the Borrower/Payor: January 31 (or February 1 if January 31 falls on a weekend)
Key Operational Points
- No safe harbors adopted. The IRS declined to let credit unions rely on dealer certifications, blanket reporting of all vehicle loans, or simplified VIN/assembly verification. The final rule requires an actual SPVL/APV determination.
- Determination burden falls on the recipient. Your credit union, not just the borrower, must determine APV/personal-use status using available loan documentation, and may rely on that documentation absent contrary information.
- VIN is mandatory. Systems must capture and report VINs; even though the IRS acknowledged many lenders don’t currently track this.
- Refinancing carries forward the obligation. A refinanced SPVL remains reportable (capped at the payoff balance); diligence is required to confirm the original loan qualified.
- One statement per loan. Only the “payor of record” (as carried on your books) receives the statement, even with co-borrowers.
- No further transition relief. 2025 transition relief still applies (Notice 2025-57) for interest received in calendar year 2025, but no further transition relief or phase-in was granted for 2026 and forward.
- Penalties apply. Standard §6721 (failure to file) and §6722 (failure to furnish) penalties apply; no additional reasonable-cause relief was added beyond existing §6724(a) standards.
Recommended Next Steps
- Confirm core/loan origination systems can identify and flag SPVLs, and capture VIN, origination date, acquisition date and can determine reportable interest.
- Update 1098-series reporting procedures and vendor files to include Form 1098-VLI.
- Build a process to evaluate personal-use expectation and APV status at origination (loan docs, purchase agreements).
- Train lending staff on data needed for negative equity and pro rata allocation on mixed-use loans.
- Confirm procedures for refinanced vehicle loans acquired from other lenders.
Informational Webinar
Get more clarity on this critical topic from Director of Compliance Support, Heather Line:
For More Information
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