Form 1098-VLI Explained: Vehicle Loan Interest Filing Requirements for Lenders

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Beginning with tax year 2026, lenders that issue qualifying vehicle loans must file Form 1098-VLI, the Vehicle Loan Interest Statement, to support a new federal deduction established by the One Big Beautiful Bill Act (OBBBA). The deduction allows individuals to deduct interest paid on qualifying vehicle loans through 2028. The IRS provided transition relief for tax year 2025, but lenders must follow the new reporting requirements for 2026. 

Understanding who must file Form 1098-VLI, what information it requires, and when to file is essential as lenders prepare for the upcoming filing season. 

What Is Form 1098-VLI?

Form 1098-VLI, or Vehicle Loan Interest Statement, is an IRS information return used to report the interest paid by borrowers on Specified Passenger Vehicle Loans (SPVLs) over the course of a calendar year.

The form exists because of the One Big Beautiful Bill Act, signed into law on July 4, 2025, which created a federal tax deduction for interest paid on certain personal use vehicle loans. This deduction applies to tax years 2025 through 2028.

To support that deduction, Form 1098-VLI enables lenders to report qualifying interest payments to both the IRS and the borrower. Borrowers then use reported figures to substantiate their interest paid when claiming the deduction on their federal tax return.

Who Files What

Not every lender or every car loan triggers a filing requirement. The rules are specific, and getting them right matters for staying compliant.

When a lender must file:

Form 1098-VLI is required if a lender received $600 or more in interest on an SPVL during the calendar year. This threshold applies per loan, not per borrower. For example, if a borrower has two vehicle loans with the same lender, each loan is evaluated separately. This requirement applies even when a lender isn’t a traditional bank, such as a dealer offering in-house financing.

Which loans qualify as an SPVL: A loan counts as an SPVL if it was originated after December 31, 2024, is for personal use (not business use), and is secured by a first lien on the vehicle.

What Information Does Form 1098-VLI Report?

Form 1098-VLI captures the details the IRS needs to verify a borrower’s vehicle loan interest deduction. The key fields include:

• Box 1 – Interest received: The total interest the lender received from the borrower on the SPVL during the calendar year
• Boxes 2a – 2d – Vehicle details: The vehicle’s year, make, model, and Vehicle Identification Number (VIN)
• Boxes 3a – 3b – Loan dates: The date the loan originated and, if applicable, the date the lender acquired the loan
• Box 4 – Outstanding principal: The remaining loan balance as of January 1 of the reporting year (or as of the origination or acquisition date if the loan started or was acquired that same year)
• Box 5 – Refund of overpaid interest: Any refund or credit issued during the year for interest the borrower overpaid in a prior year

It’s important to note that the underlying deduction ony applies to vehicles assembled in the United States. The VIN tells the IRS and the borrower that the vehicle meets this specific eligibility requirement.

Filing Due Dates for Form 1098-VLI 

Form 1098-VLI follows the standard information return filing schedule:

• Furnish Copy B to borrowers: January 31st 
• File paper forms with the IRS: February 28th
• File electronic forms with the IRS: March 31st

Note: If the deadline falls on a weekend or federal holiday, it moves to the next business day. 

Lenders filing 10 or more information returns in aggregate are generally required to file electronically, making the March 31st deadline the more relevant one for most. Since Form 1098-VLI remains in draft status, lenders should confirm these dates once the IRS finalizes instructions.

Knowing Penalties

Once mandatory filing begins for tax year 2026, lenders become subject to the standard penalty structure that applies across information returns, with penalties tiered based on how quickly an error is corrected:

• $60 per form if corrected within 30 days
• $130 per form if corrected by August 1st
• $340 per form if corrected after August 1st, or not filed at all

The 2025 exception: Under the current transitional guidance, no penalties are expected for missing the IRS filing for tax year 2025. This exception, however, doesn’t extend to future years; lenders should treat 2026 onward as full compliance territory, with the usual filing and furnishing deadlines back in effect.

What This Means for Car Buyers and Borrowers

For borrowers, Form 1098-VLI is what makes it possible to claim this deduction. The interest amount reported on the form is entered on Schedule 1-A when filing your federal tax return, and this deduction is available when taking the standard deduction.

A few details matter when claiming it:

• Maximum annual deduction: Up to $10,000 in vehicle loan interest per year
• Income limits: The deduction begins phasing out for taxpayers with a modified adjusted gross income (MAGI) above $100,000 (single filers) or $200,000 (joint filers)
• Vehicle eligibility: The vehicle must be new, assembled in the United States, and financed through a loan originated after December 31, 2024

If your Form 1098-VLI has missing or incorrect information, such as an invalid VIN, contact your lender for a corrected form before filing. Form inaccuracies can jeopardize the deduction.

Final Thoughts 

Understanding the filing deadlines, penalty structure, and reporting requirements now helps lenders avoid costly errors, while borrowers benefit from knowing what to expect on their statements and how to use them. As the IRS finalizes its instructions, staying informed will make this new deduction easier to navigate for everyone involved.

Lenders looking to simplify Form 1098-VLI reporting can rely on TaxBandits for a streamlined filing experience. TaxBandits is expanding its support for Form 1098-VLI soon, with built-in error checks and bulk-filing capabilities designed to help lenders file accurately and efficiently.