Katie BaileyThe Treasury Department and Internal Revenue Service have issued final regulations addressing the new federal income tax deduction for qualified passenger vehicle loan interest and related information reporting requirements. The rules create new data collection, reporting, and member statement responsibilities for credit unions that make or service qualifying vehicle loans.
A credit union generally must report when it receives at least $600 of interest during a calendar year on a specified passenger vehicle loan. Generally, the loan must have been incurred after December 31, 2024, to purchase a qualifying passenger vehicle for personal use and must be secured by a first lien on the vehicle. Qualifying vehicles include cars, minivans, vans, sport utility vehicles, pickup trucks, and motorcycles that meet regulatory requirements, including final assembly in the United States.
For each qualifying loan that meets the $600 threshold, the credit union must file an information return with the IRS and furnish a statement to the borrower. Reporting is made on Form 1098 VLI, Vehicle Loan Interest Statement.
Credit unions should begin reviewing whether their current systems can identify qualifying loans and capture the information necessary for reporting. This includes working with lending, servicing, information technology, core processors, and tax reporting vendors to determine whether changes to current procedures or data collection are necessary.
The IRS previously provided transitional relief for 2025. The final regulations do not provide additional transition relief.
Credit unions should treat the new vehicle loan interest reporting requirement as a data and systems implementation issue, not simply a year-end tax reporting task.
