New Auto Loan Interest Reporting Under OBBBA: What Lenders Need to Know

reading time: 13 minute(s)

There’s a new tax break for car buyers, and it comes with a new filing job for lenders. Thanks to the One Big Beautiful Bill Act (OBBBA), individuals can now deduct interest paid on qualifying auto loans. Starting with 2026 interest, lenders have to report that interest to both the IRS and the borrower on a new form.

The U.S. Treasury and the IRS finalized the rules on September 8, 2026, and the reporting requirement takes effect November 9, 2026.

The Deduction, in Brief

For tax years 2025 through 2028, individuals can deduct up to $10,000 a year in auto loan interest, no itemizing required. The loan has to be for a personal-use vehicle originated after 2024. The deduction phases out for higher earners: roughly $100,000 to $150,000 in modified adjusted gross income (MAGI) for single filers, and $200,000 to $250,000 for joint filers.

Because borrowers need accurate numbers to claim this deduction, lenders now have to supply them.

Who Has to Report

Basically, any business that collects $600 or more in interest on a qualifying auto loan from one borrower in a year needs to report it. That includes banks, finance companies, dealers who finance in-house, and loan servicers who hold the relevant data.

The $600 threshold applies per loan, not per borrower, the same logic used for mortgage and student loan interest reporting. So a borrower with two smaller loans that don’t individually cross $600 doesn’t trigger reporting on either one.

Which Loans Qualify

The short version: new loans (originated after 2024) for personal-use cars, SUVs, vans, pickups, and motorcycles under 14,000 pounds, assembled in the U.S., bought new by their first owner, and secured by the vehicle itself. Used vehicles don’t qualify.

You can roll some related costs into the interest that counts, including warranties, GAP coverage, and title and registration fees. Trade-in negative equity and unrelated insurance don’t count. If a loan mixes qualifying and non-qualifying amounts, lenders need to split out and report only the qualifying portion.

A handful of edge cases have their own rules: refinances, loan transfers, mixed-purpose loans, and a borrower’s death. The IRS guidance and our Form 1098-VLI guide walk through those in detail if you run into one.

What Lenders Actually Have to Track

For each qualifying loan, you’ll need to report standard borrower and lender identifying info, plus:

• Total interest received for the year
• Beginning-of-year principal balance
• Vehicle details (year, make, model, and vehicle identification number, or VIN)
• Loan origination and acquisition dates

The VIN matters most here. It’s what confirms the vehicle qualifies, so accuracy is worth double-checking.

The Form and When It’s Due

The new form is Form 1098-VLI (Vehicle Loan Interest Statement). For interest received in 2026, the first year this is mandatory, here’s the timeline:

• Borrower statements: due January 31, 2027
• IRS filing: due February 28, 2027 (paper) or March 31, 2027 (e-file)

If you’re filing 10 or more information returns total across return types, you’ll need to e-file. Also worth flagging: the IRS is retiring its older FIRE e-filing system. FIRE stops accepting submissions on November 19, 2026, and starting January 1, 2027, IRIS becomes the only option. We’ve got a rundown of that transition if you haven’t planned for it yet.

One bit of good news: for interest received in 2025, there’s no return to file with the IRS at all. Under IRS transition relief, simply getting a statement of 2025 interest to the borrower by January 31, 2026 satisfies the requirement, no penalties, no form required. Treat 2026 interest, filed in 2027, as when the ongoing reporting obligation actually kicks in.

Getting Ready

If you originate or service auto loans, now’s a good time to make sure your systems can do the following:

• Flag which loans qualify and apply the $600 threshold correctly
• Capture VINs and vehicle details reliably
• Track origination and acquisition dates along with interest and principal figures
• Handle refinances, transfers, and corrections
• Generate and file Form 1098-VLI, including e-filing if you’re required to

Bottom Line

Starting with 2026 interest, auto lenders take on the same kind of 1098 reporting that mortgage and student loan lenders already handle. The rules get detailed once you hit edge cases, so when in doubt, check the final IRS regulations or our Form 1098-VLI guide. The big picture stays simple: track the interest, capture the vehicle data, and file on time.

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.