The IRS has introduced a new tax form called Form 1098 VLI, also known as the Vehicle Loan Interest Statement, which lenders will begin issuing for the 2025 tax year. This form standardizes how interest on qualified passenger vehicle loans is reported and supports new tax benefits available under the One, Big, Beautiful Bill (OBBB). Because the IRS has not completed the full electronic filing specifications, many lenders are preparing early to understand what is required.
Key Takeaway:
Form 1098 VLI is new for 2025, and lenders must provide interest statements to borrowers. However, the IRS is offering transition relief for 2025. WageFiling can help by preparing substitute forms that can be printed and mailed now.
Understanding these new requirements, including the transitional relief announced by the IRS, helps lenders, dealerships, and finance companies stay compliant.
What Is Form 1098 VLI?
Form 1098 VLI stands for Vehicle Loan Interest Statement. It is a new IRS information return created for lenders who receive interest on qualified passenger vehicle loans. Similar to how mortgage interest is reported on the existing Form 1098, this new form provides borrowers with standardized documentation they may use when preparing tax returns.
These updates come from the One, Big, Beautiful Bill, which introduced a temporary tax benefit allowing certain taxpayers to deduct interest paid on personal use vehicle loans from 2025 through 2028.
Why Is the 1098 VLI Form Being Introduced?
The IRS created Form 1098 VLI to ensure consistent and accurate reporting of car loan interest. With vehicle financing becoming more common and loan amounts increasing, this form helps borrowers who qualify for the new OBBB deduction document their interest payments.
A key reason for the new form is the auto loan interest deduction introduced under the One, Big, Beautiful Bill. For the first time, taxpayers may be eligible to deduct interest paid on certain personal use vehicle loans beginning in 2025. Borrowers will rely on the 1098 VLI as their official record when claiming this deduction, which makes accurate lender reporting essential.
For lenders, this introduces a new reporting responsibility. For borrowers, it provides clarity around interest paid throughout the year.
Who Must Issue Form 1098 VLI?
The reporting requirement applies to lenders who receive $600 or more in interest from an individual on a qualified passenger vehicle loan during the calendar year. This includes:
- Auto dealerships with in house financing
- Captive finance companies
- Banks and credit unions
- Online lenders
- Any business servicing qualified passenger vehicle loans
A qualified passenger vehicle includes cars, SUVs, minivans, vans, pickup trucks, and motorcycles that weigh less than 14,000 pounds and are assembled in the United States.
Transition Relief for 2025: What Lenders Need to Know
On October 21, 2025, the IRS issued Notice 2025 57, providing transitional guidance and penalty relief for lenders reporting car loan interest under OBBB.
According to the IRS:
- Lenders must provide borrowers with the total amount of interest received in 2025.
- Lenders do not need to file information returns with the IRS for the 2025 tax year.
- If lenders comply with the borrower reporting requirement, the IRS will not impose penalties for failing to file information returns.
To comply for 2025, lenders can make the total interest received available to borrowers through:
- An online borrower portal
- A regular monthly loan statement
- An annual statement
- Or another method that provides accurate information
This relief allows lenders more time to prepare for the formal reporting requirements that will apply in later tax years.
You can read the IRS newsroom announcement here.
What Information Does Form 1098 VLI Include?
Based on the currently available draft, Form 1098 VLI includes:
- Total vehicle loan interest received
- Borrower identification
- Loan account information
- Lender name and contact information
Final instructions and electronic filing specifications will be released at a later date.
How WageFiling Supports Form 1098 VLI
WageFiling is prepared to support lenders during the 2025 transition period and beyond. While the IRS completes its final instructions, WageFiling offers the following:
1. Substitute Print and Mail Forms
WageFiling can prepare substitute versions of Form 1098 VLI and mail them to borrowers, helping lenders meet their 2025 reporting obligations before full IRS specifications are available.
2. On Demand Form Assistance
Lenders can email support@wagefiling.com to request assistance with preparing borrower statements or substitute forms.
3. Automatic Platform Updates
Once the IRS releases complete electronic filing details, WageFiling will update its system to support official filing of Form 1098 VLI in future years.
How WageFiling Stays Updated on IRS System Changes
WageFiling consistently updates its platform to align with IRS technology changes and new compliance requirements, including updates to IRIS.
Frequently Asked Questions
1. Do lenders need to file Form 1098 VLI with the IRS in 2025?
No. The IRS is offering transition relief. Lenders must provide interest information to borrowers but do not need to file information returns with the IRS for 2025.
2. Can borrowers use the 1098 VLI for tax deductions?
Borrowers who qualify under the OBBB may use the interest information to support vehicle loan interest deductions. They should consult a tax professional for guidance.
3. Can WageFiling help lenders prepare required borrower statements?
Yes. WageFiling supports substitute versions of the 1098 VLI and can help lenders meet borrower reporting requirements for 2025.
