Form 1098-VLI box by box: your car loan interest deduction for 2026
Form 1098-VLI reports car loan interest starting with 2026. Every box explained, the $10,000 deduction and its phase-out, and the 2025 transition rule.
The short answer. Form 1098-VLI, Vehicle Loan Interest Statement, is a brand-new information return. The IRS built it to carry the reporting that 26 U.S.C. section 6050AA now requires of any lender — bank, credit union, or dealer — that receives $600 or more in a calendar year on a single car loan from an individual, and the December 2026 revision is the first version of the form that has ever existed. It does not apply to 2025 interest, which lenders could report through a simpler transition statement instead. Starting with interest your lender receives in 2026, the real form applies: statements go out to borrowers by January 31, 2027, and the return itself is due at the IRS by February 28, 2027 on paper or March 31, 2027 electronically — effectively the deadline for almost everyone, given how few filers stay under the electronic-filing threshold. The form feeds directly into the separate deduction under 26 U.S.C. section 163(h)(4): up to $10,000 of qualified passenger vehicle loan interest, phased out by $200 per $1,000 that your modified adjusted gross income runs above $100,000 single or $200,000 joint, available only for tax years 2025 through 2028, and only for a vehicle whose original use began with you and whose final assembly happened in the United States.
Why this form exists at all
Congress created the car loan interest deduction and the reporting requirement behind it in the same law, the One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025. The deduction lives in section 163(h)(4); the reporting requirement backing it up lives in section 6050AA, a new section added by the same bill. Neither exists without the other in practice. The deduction depends on a VIN appearing on your return — the statute is explicit that “interest shall not be treated as qualified passenger vehicle loan interest… unless the taxpayer includes the vehicle identification number” — and the IRS needs a way to cross-check that VIN, and the interest attached to it, against what the lender received. Form 1098-VLI is that cross-check, built on the same logic as Form 1098 for mortgage interest: your lender tells the IRS what it received, and you tell the IRS what you are deducting, and the two are supposed to match.
That is also why the form did not exist before 2026. Section 6050AA only requires a return for a “specified passenger vehicle loan,” defined as “the indebtedness described in section 163(h)(4)(B)” — and the deduction itself only reaches interest on debt “incurred by the taxpayer after December 31, 2024.” There was nothing to report on a 2024 return, so the IRS used 2025 as a transition period rather than demanding full compliance in the deduction’s first, partial year. The layout below was finalized only once the IRS worked through the proposed and final regulations implementing the statute, covered later in this guide.
Who has to file it
The filing obligation falls on “any person” who is “engaged in a trade or business” and who, in that business, “receives from any individual” — the statute also names a decedent’s estate or a nongrantor trust — “interest aggregating $600 or more for any calendar year on a specified passenger vehicle loan.” The final instructions catch a detail worth knowing: the obligation applies “even if you are not in the business of lending money.” A dealership that finances a purchase in-house is still a lender for this purpose, and still has to file once the interest on that one loan crosses $600 in a year.
Two categories are carved out: interest from a related party (section 267(b) or 707(b)(1)), and interest from a nonresident-alien payer of record. The $600 threshold applies “separately per SPVL,” not as an aggregate across a lender’s borrowers — a lender servicing thousands of loans evaluates the test one loan at a time.
The form, box by box
Form 1098-VLI packs a full loan history onto one document — vehicle identity, dates, balances, and two compliance questions — because the deduction on your return depends on all of it lining up. Here is what each box means for you.
| Box | What it reports | What it means for your return |
|---|---|---|
| 1 | Vehicle loan interest received by the lender | Subject to the $10,000 cap and MAGI phase-out, this becomes your qualified passenger vehicle loan interest deduction — the box-1 counterpart of what box 1 does on Form 1098 for mortgage interest. |
| 2a-2d | Vehicle year, make, model, and VIN | Where the VIN the statute requires on your return comes from. Copy it exactly — it is what lets the IRS match your deduction to the lender’s return. |
| 3a-3b | Loan origination date and acquisition date | Acquisition applies if your lender bought the loan after origination (a loan sold to a different servicer). Both dates help establish the debt was incurred after December 31, 2024, the statute’s cutoff. |
| 4 | Outstanding principal | As of January 1, or the date of origination/acquisition if mid-year. Balance information for cross-checking the loan; it does not itself feed the deduction. |
| 5 | Refund of overpaid interest | Interest the lender previously reported and then refunded, the same concept used elsewhere in the 1098- and 1099-series. |
| 6 | Original use began with the payer of record | Checked means the lender represents you as the vehicle’s first user — required for it to count as an “applicable passenger vehicle” at all. Unchecked, or a used vehicle, and the interest cannot qualify. |
| 7 | Final assembly occurred in the United States | Checked means the lender represents that final assembly — where the vehicle left the plant with every component needed to run, whether or not installed — happened domestically. Unchecked, the vehicle fails the definition regardless of box 6. |
The header carries the fields common to every 1098-series form: the lender’s name, address, phone, and TIN; your name, address, and TIN as payer of record; an account number; and VOID/CORRECTED checkboxes. It is issued in two copies — Copy A, the IRS’s scannable red-ink copy, and Copy B, yours to keep. One privacy detail: your TIN may be truncated on your copy, but the lender’s TIN may never be truncated on any copy.
The deduction the form feeds: section 163(h)(4)
Form 1098-VLI only reports what the lender received. Whether that interest actually reduces your taxes runs through section 163(h)(4), a temporary provision that reclassifies certain car loan interest so it stops being nondeductible “personal interest.” The reclassification applies only “in the case of taxable years beginning after December 31, 2024, and before January 1, 2029” — tax years 2025 through 2028, and nothing beyond.
What counts as qualified interest. The debt has to have been incurred by you after December 31, 2024, for the purchase of a vehicle, secured by a first lien on that vehicle, for personal use. The statute excludes several categories outright even if those tests are met: interest on a loan financing fleet sales, a loan for a commercial vehicle not used personally, any lease financing, a loan for a vehicle with a salvage title, and a loan for a vehicle bought to be scrapped or used for parts. Refinancing carries the qualified status forward, but only up to the amount of the original refinanced debt — refinance into a larger loan, and the excess above the old balance is not qualified interest. Interest owed to a related party, under the same section 267(b) and 707(b)(1) tests that apply to the lender’s filing obligation, never qualifies.
What counts as an applicable passenger vehicle. This is where boxes 6 and 7 do their work. The vehicle must be one whose original use commences with you; manufactured primarily for use on public streets, roads, and highways (excluding anything that only runs on rails); with at least two wheels; a car, minivan, van, SUV, pickup, or motorcycle; treated as a motor vehicle under Title II of the Clean Air Act; and under a 14,000-pound gross vehicle weight rating. On top of that, its final assembly must have occurred within the United States — the process, at a plant, that produces the vehicle with every component necessary for its mechanical operation included, whether or not permanently installed by the time it leaves. The final regulations offer two ways to check that: the plant-of-manufacture code embedded in the VIN under 49 CFR 565, or the final-assembly-point label under 49 CFR 583.5(a)(3), pointing to NHTSA’s own VIN decoder tool as an aid.
The dollar limits. The interest taken into account cannot exceed $10,000 for the taxable year, and the final regulations confirm that cap applies “regardless of the taxpayer’s filing status” — not a per-vehicle or doubled-for-joint-filers number. Above that, the deduction is reduced, but never below zero, “by $200 for each $1,000 (or portion thereof) by which” your modified adjusted gross income exceeds $100,000, or $200,000 joint. MAGI here is adjusted gross income increased by any amount excluded under section 911 (foreign earned income), section 931 (US possessions income), or section 933 (Puerto Rico income). For an estate or nongrantor trust with its own car loan, the final regulations apply the phase-out at the entity level rather than to beneficiaries, using AGI as defined for estates and trusts under section 67(e).
VIN on the return, not just on the form
One more piece is easy to miss: the deduction is conditioned on a step you take, not just a step your lender takes. The statute says the interest is not treated as qualified passenger vehicle loan interest “unless the taxpayer includes the vehicle identification number… on the return of tax for the taxable year.” Form 1098-VLI gives you the VIN in boxes 2a through 2d, but the form arriving in your mailbox does not by itself put the VIN on your 1040 — that is a separate entry you make when you claim the deduction. This site’s line-by-line look at the 2026 Schedule 1-A draft covers exactly where that VIN, and the two yes-or-no questions mirroring boxes 6 and 7, land on the schedule the IRS has proposed for claiming this deduction, along with the phase-out calculator built around that schedule’s math. The two documents are meant to be read together, the information return backing the entries on the deduction schedule.
Two worked examples
A single filer with $4,000 of interest and MAGI of $110,000. The box-1 interest of $4,000 is well under the $10,000 cap, so the cap itself does not bind. The phase-out is the part that reduces it: MAGI of $110,000 exceeds the $100,000 single threshold by $10,000, which divides evenly into ten $1,000 increments with nothing left over, so no rounding is needed either way. Ten increments at $200 each is a $2,000 reduction. The deduction is $4,000 minus $2,000, or $2,000.
A married couple filing jointly with MAGI of $150,000 and, say, $6,000 of interest. The joint-return threshold is $200,000, and this couple’s MAGI sits $50,000 below it — nowhere near the phase-out range. Box-1 interest of $6,000 is also under the $10,000 cap. Neither limitation applies, so the full $6,000 is deductible.
# "$200 for each $1,000 (or portion thereof)" — statute's rounding language
import math
def qpvli_deduction(box1_interest, magi, joint):
threshold = 200_000 if joint else 100_000
capped = min(box1_interest, 10_000)
excess = max(0, magi - threshold)
increments = math.ceil(excess / 1_000) # portion thereof -> round up
reduction = 200 * increments
return max(0, capped - reduction)
print(qpvli_deduction(4_000, 110_000, joint=False)) # 2000
print(qpvli_deduction(6_000, 150_000, joint=True)) # 6000
The single filer’s example divides evenly, so it does not show the rounding rule doing anything — but “or portion thereof” means that if this filer’s MAGI had been $110,500 instead, the excess of $10,500 would divide into 10.5 increments, rounded up to 11, for a $2,200 reduction rather than $2,100. The rounding always runs against the taxpayer, the same asymmetric convention the draft Schedule 1-A applies to this phase-out.
The 2025 transition: a simpler statement, not the real form
Form 1098-VLI itself never applied to 2025. For that one year, the IRS used Notice 2025-57 to give lenders a lighter option: instead of the box-by-box form, a lender could satisfy its section 6050AA obligation for 2025 “by making a statement available to the individual on or before January 31, 2026, indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan” — delivered through something as simple as an online account portal or a monthly statement, with no VIN or box-by-box detail required. The notice also said the IRS “will not impose penalties under sections 6721 and 6722” on lenders reporting this way for 2025. That relief was scoped narrowly: it is “effective for returns and statements related to interest received during calendar year 2025” and nothing later. If you financed a car in 2025 and your lender sent you a simple total rather than a numbered-box form, that was very likely this transition statement doing its job, not an error. Starting with interest received in 2026, the real Form 1098-VLI applies, with statements due to borrowers by January 31, 2027.
The regulations behind the form
The IRS did not settle the box layout, or how the phase-out and vehicle definitions work in edge cases, without a full rulemaking process. A proposed rule, “Car Loan Interest Deduction” under docket REG-113515-25, was published in the Federal Register January 2, 2026 (91 FR 67); the comment period closed February 2, 2026, with a public hearing February 24, 2026. The final rule followed: Treasury Decision 10054, also titled “Car Loan Interest Deduction,” published September 8, 2026 (91 FR 57214), effective November 9, 2026, and appearing in Internal Revenue Bulletin 2026-39. Its abstract covers both the deduction and “new information reporting requirements for certain persons who… receive from any individual interest aggregating $600 or more for any calendar year on a specified passenger vehicle loan” — one regulatory package for both pieces. It created two new regulation sections: 1.163-16 for the deduction’s mechanics, and 301.6050AA-1 for the reporting rules Form 1098-VLI implements.
Sources
- 26 U.S.C. § 163(h)(4) — law.cornell.edu/uscode/text/26/163
- 26 U.S.C. § 6050AA — law.cornell.edu/uscode/text/26/6050AA
- IRS, Form 1098-VLI (December 2026) — irs.gov/pub/irs-pdf/f1098vli.pdf
- IRS, Instructions for Form 1098-VLI — irs.gov/pub/irs-pdf/i1098vli.pdf
- IRS, Notice 2025-57 — irs.gov/pub/irs-drop/n-25-57.pdf
- IRS Publication 1099, General Instructions for Certain Information Returns — due-date table for Form 1098-VLI
- Federal Register, REG-113515-25, “Car Loan Interest Deduction,” 91 FR 67 (Jan. 2, 2026)
- Federal Register, T.D. 10054, “Car Loan Interest Deduction,” 91 FR 57214 (Sept. 8, 2026, effective Nov. 9, 2026)
- finbarrow, Schedule 1-A 2026 draft: every line that changed
- finbarrow, Schedule 1-A deductions calculator
- finbarrow, Form 1040 2026 draft: every line that changed
- finbarrow, Form 1099-NEC 2026: the $2,000 threshold and new boxes
Quick answers
What is Form 1098-VLI and who sends it to me?
Form 1098-VLI, Vehicle Loan Interest Statement, is a new information return your lender files to report interest it received on a car loan. Under 26 U.S.C. section 6050AA, any person engaged in a trade or business that receives $600 or more of interest in a calendar year on a specified passenger vehicle loan from an individual, a decedent's estate, or a nongrantor trust must file it, and that obligation applies "even if you are not in the business of lending money" — a dealer that finances a purchase directly is on the hook the same as a bank or credit union. The form was created for 2026 interest; it does not exist for any earlier tax year.
Does receiving Form 1098-VLI mean my car loan interest is automatically deductible?
No. The form only reports what your lender received; it does not decide whether the interest qualifies under 26 U.S.C. section 163(h)(4). You still have to check that the loan was incurred after December 31, 2024, that it financed a vehicle for personal use secured by a first lien, and that the vehicle is an "applicable passenger vehicle" — meaning its original use began with you and its final assembly happened in the United States. Boxes 6 and 7 tell you how your lender answered those two questions, but you are the one who has to report the vehicle identification number on your return, and without it the interest cannot be qualified passenger vehicle loan interest at all.
My MAGI is above $100,000. How much of my car loan interest can I still deduct?
The deduction is reduced, but usually not to zero. Section 163(h)(4)(C)(ii) cuts it by $200 for every $1,000 — or fraction of $1,000 — that your modified adjusted gross income (MAGI) exceeds $100,000 single or $200,000 joint, and it cannot go below zero. MAGI here means adjusted gross income plus any amount excluded under the foreign earned income exclusion, the Puerto Rico exclusion, or the American Samoa exclusion. Because the reduction climbs $200 per $1,000 of excess MAGI, the deduction phases out completely once MAGI clears the threshold by $50,000 for a filer claiming the full $10,000 — $150,000 MAGI single, $250,000 joint — though a filer with less interest to begin with phases out sooner than that.
Can I deduct interest on a loan for a used car?
No. One of the two tests written into the definition of an "applicable passenger vehicle" is that its original use must commence with you, the taxpayer — and by definition, a used car's original use already commenced with somebody else. It fails that test regardless of where the vehicle was assembled, how new the loan is, or how much interest you paid. Box 6 on Form 1098-VLI is where your lender is supposed to check whether original use began with you; if it is unchecked, or if you already know the car had a prior owner, the interest on that loan cannot become qualified passenger vehicle loan interest no matter what else about the loan looks right.
What happened with car loan interest reporting for 2025, before Form 1098-VLI existed?
For calendar year 2025 only, the IRS gave lenders a shortcut in Notice 2025-57: instead of the box-by-box detail Form 1098-VLI requires, a lender could satisfy its section 6050AA obligation with a statement showing just the total interest received in 2025 on a specified passenger vehicle loan, delivered by January 31, 2026, through something as simple as an online account portal or a regular monthly statement. The IRS also said it would not impose the usual section 6721 and 6722 penalties on lenders reporting this way for 2025. That relief covered only 2025 interest. Starting with interest received in 2026, lenders use the real Form 1098-VLI, with statements due to borrowers by January 31, 2027.
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