Tax forms rarely make headlines, but this one is worth the notice. Starting with tax year 2026, a new IRS form will change how credit unions report interest on certain vehicle loans, and it comes with a new deduction that could put real money back in members’ pockets.
Congress created the deduction as part of H.R. 1, the tax law signed in 2025, letting borrowers deduct interest paid on qualifying new vehicle loans. To support it, the IRS introduced Form 1098-VLI, the Vehicle Loan Interest Statement (VLI). Lenders, including credit unions, that receive $600 or more in interest on a qualifying loan during the year will need to report that interest to both the IRS and the borrower, the same way Form 1098 already works for mortgage interest. Statements for tax year 2026 are due to borrowers by January 31, 2027.
Not every vehicle loan counts. The IRS calls a qualifying loan a specified passenger vehicle loan, and it has to meet certain criteria:
· A first lien on the vehicle must secure the loan
· The vehicle must be new
· Its final assembly has to have happened in the United States
· Its model year must be 2022 or later
· The loan has to be for personal use rather than business use
In addition to these rules, the borrower must be a U.S. citizen or resident alien, and the loan has to have originated after December31, 2024.
Credit unions have some lead time before the January 31, 2027 deadline, but not an unlimited amount. Eligibility checks, like final assembly and model year, can be determined automatically from information already on file. Others, like whether a vehicle is new or whether a loan is for personal or business use, will require a few new questions for loan origination staff.
Sharetec is building the tools credit unions will need to capture this information and generate accurate 1098-VLI statements, with delivery planned for the fourth quarter of 2026. We’re also working through a plan for credit unions that won’t have the new screens ready in time for tax year 2026, so no credit union is left without a path to compliance.
The deduction itself is good news for members. It’s capped at $10,000 a year and phases out at higher incomes, but for many borrowers it’s a real benefit on a loan they’re already carrying. Getting the reporting right is beneficial for credit unions too, since accurate statements mean fewer questions from members come tax season.
If your credit union has questions about the 1098-VLI,please reach out to your Sharetec Client Account Executive.
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