The vehicle loan interest deduction has been in the statute since the One Big Beautiful Bill. What changed for lenders is the filing machinery. The IRS has put Form 1098-VLI into the IRIS tax-year 2026 schema packages, Assurance Testing is open on that track, and production filing for calendar-year 2026 interest is aimed at the January 2027 IRIS season — with borrower copies due January 31 and the IRS e-file date typically March 31.
This page is a short recap of the deduction plus a status check on schemas and IRIS. Step-by-step portal / A2A work: file 1098-VLI through IRIS. 2025 vs 2026 reporting: IRS car loan interest reporting.
Where IRIS and the schema stand
Form 1098-VLI is an information return for specified passenger vehicle loan (SPVL) interest. It lives in the IRS Information Returns Intake System (IRIS) — not as a legacy FIRE / Publication 1220 flat file.
On the IRS IRIS schemas and business rules page, Form 1098-VLI is listed in the TY2026 form series (alongside the rest of the 1098 / 1099 family in that package). Recent package history includes:
| Package | Available in SOR (IRS table) | ATS | Production (IRS table) |
|---|---|---|---|
| TY2026 v1.0 (early look) | July 15, 2026 | — | Jan 2027 |
| TY2026 v1.1 | Sept 14, 2026 | — | Jan 2027 |
| TY2026 v1.2 | Sept 24, 2026 | Oct 5, 2026 | Jan 2027 |
Schema and business-rule ZIPs sit in the Secure Object Repository (SOR) for transmitters with a completed IRIS TCC and the right e-Services role — not as a casual public download for every lender. Software developers and agencies pull from SOR; most auto lenders will either build against that package or use a transmitter that already has.
IRS has also updated transmission XML requirements (including SchemaVersionNum for current IRIS transmissions). Use the version in the current SOR package and the e-file with IRIS page — do not hard-code an old build from a blog.
Practical takeaway: the form is no longer “wait and see if IRIS will support it.” The TY2026 schema line includes 1098-VLI, ATS has a start date on that line, and production is tied to the 2027 filing season for 2026 interest.
Filing paths that matter now
- IRIS Taxpayer Portal — enter returns in the browser (smaller counts).
- Application-to-Application (A2A) — XML to IRIS against the published schema; assurance testing before production.
- Authorized transmitter / filing service — same IRS acceptance, without your shop owning the XSD.
If you file 10 or more information returns of any type in a year, e-file is generally required. Most lenders with an auto book are already over that line. IRIS does not mail borrower copies for you — furnish still has its own January 31 clock. Deadlines and penalties: filing deadlines, penalties.
2025 interest had Notice 2025-57 transition relief (interest available to borrowers without a full IRS 1098-VLI file in many cases). 2026 interest is full furnish + IRS file when the $600 SPVL test is met.
Quick recap: what the deduction is
For tax years 2025 through 2028, individuals may deduct up to $10,000 a year of qualified passenger vehicle loan interest (above the line on Schedule 1-A), subject to MAGI phase-outs and the usual vehicle/loan tests. It is not the same as Schedule C business interest, and it is not a senior-only break.
At a high level, interest only counts when it is on a qualifying SPVL — purchase-money debt after 2024, first lien, personal use under the regulations, on an applicable passenger vehicle (new to the borrower, U.S. final assembly, listed type, under 14,000 lb GVWR, and so on). Cap and income: MAGI guide. Vehicle facts: which cars qualify. How to claim: how to claim.
Getting a Form 1098-VLI (or a 2025 transition statement) does not automatically mean the full Box 1 amount is deductible. Form basics: Form 1098-VLI explained.
What lenders should do with the schema live
The schema release is the cue to stop treating 1098-VLI as a policy memo and start treating it as a data + transmission project:
- Confirm TCC / IRIS access (or your vendor’s) months before March — not in late February.
- Map loan-system fields to Boxes 1–7 (VIN, dates, principal, Boxes 6–7) — line by line, original use / assembly ops.
- Decide portal vs A2A vs transmitter; if A2A, plan ATS against the current TY2026 package.
- Remember sales and servicing splits — who received the interest files — loan sale / servicing.
- Keep 1099-INT as a separate process — 1098-VLI vs 1099-INT.
Spreadsheet upload path if you file with us: how to upload borrower data. Account: sign up.
Bottom line
The deduction rules are the recap. The news is that IRIS TY2026 schemas include Form 1098-VLI, testing is on the calendar, and the first full IRS filing season for 2026 interest is the one coming in early 2027. Build the extract and the transmission path now, while the schema package is available — not after January statements are already late.
Educational information only, not legal or tax advice. Confirm schema versions, ATS/production dates, and SchemaVersionNum against the current IRS IRIS pages and your SOR package for the tax year you are filing.
