Car Loan Interest Tax Deductions: New IRS Rules Explained

As the new year gets underway, taxpayers are navigating several updates from the latest federal tax law—including new guidance on when car loan interest may be deductible. According to a recent Forbes report, the IRS has issued updated clarification explaining how and under what circumstances vehicle loan interest can qualify for a tax deduction.

FAQs:

What are the eligibility requirements to receive the deduction?

To qualify, both the vehicle and the buyer must meet these criteria:

• New Vehicle Only – Must be a brand new vehicle; used vehicles and leases do not qualify.
• US Assembly – Final assembly of vehicle must occur in the United States (verify via VIN or dealer documentation).
• Personal Use – Vehicle must be for personal, non-commercial use.
• Qualifying Vehicle Types – Cars, vans, minivans, SUVs, pickup trucks, and motorcycles with Gross Vehicle Weight Rating under 14,000 lbs qualify.
• Purchase Date – Loan must have been purchased and originated after December 31, 2024 and before January 1, 2029.
• Loan Type – Interest must be paid on a standard, secured vehicle loan.

The deduction phases out for Modified Adjusted Gross Income over $100,000 (single) or $200,000 (joint). It is reduced by $200 for every $1,000 over the limit, and is fully phased out at incomes of $150,000 (single) and $250,000 (joint).

How do I compute this for my taxes?
 Because tax situations can vary widely, it’s strongly recommended to consult a qualified tax professional or CPA to ensure calculations are accurate and compliant with IRS requirements.

Where can I find my tax form for car loan interest?

For the 2025 tax year, most borrowers will not receive a separate IRS tax form specifically for auto loan interest. Because 2025 is considered a transition year under the new federal tax law, the IRS did not require financial institutions to issue Form 1098-VLI yet. TVFCU and most lenders will begin issuing this form starting with the 2026 tax year.

For filing your 2025 taxes, you can find the information you need on your December 2025 TVFCU loan statement. The total interest you paid for the year will appear as “YTD Finance Charges.” This amount can be used by your tax professional to determine whether your interest qualifies for the deduction.

It’s important to note that your ability to deduct eligible vehicle loan interest does not depend on receiving a Form 1098-VLI. Proper documentation, such as your year-end statement, is sufficient when filing. If you’re unsure how to report this or whether your loan qualifies, we recommend working with a qualified tax professional.

Where do I find information on how much interest I paid on my vehicle loan in 2025?
When filing your 2025 taxes, you will find the total 2025 interest paid on any TVFCU vehicle loan on your December 2025 statement. It will be labeled “YTD Finance Charges.”

What about the 1098-VLI form?
Because 2025 is being treated as a transition year, the IRS did not create a tax form for auto loan interest for the 2025 tax year. Most financial institutions, including TVFCU, are not issuing 1098-VLI until the 2026 tax year forms. For filing 2025 taxes, the information provided on your December 2025 statement is sufficient.  A borrower’s right to deduct interest does not depend on receiving a Form 1098-VLI.

What if I have more questions?
If you’re unsure how these rules apply to you, a tax professional can help determine eligibility and proper reporting. If your questions are related to your existing TVFCU auto loans or have plans to refinance with us, we are here to help.