The Internal Revenue Service has finalized a rule requiring auto lenders to report car-loan interest payments directly to the agency on a new form, starting with interest paid in 2026. The requirement grows out of the car-loan interest deduction that Congress created in its 2025 tax law, and it gives the IRS the same kind of third-party paper trail for car loans that already exists for mortgages. For the roughly one-and-a-half million taxpayers who have already claimed the deduction on U.S.-assembled vehicles, the new form means lenders, not just borrowers, will now be telling the IRS how much loan interest changed hands each year.
A New IRS Form Behind the Car-Loan Interest Deduction
The Treasury Department and the IRS finalized the regulation, formally Treasury Decision 10054, in a rule filed with the Federal Register covering the car loan interest deduction and the reporting requirements that accompany it. The rule adds a new section to the tax code, Section 6050AA, that requires any lender or other business that receives $600 or more in interest on a qualifying vehicle loan in a calendar year to file an information return with the IRS and send a matching statement to the borrower. The IRS has created a dedicated form for that purpose, a vehicle-loan counterpart to the Form 1098 that mortgage lenders already send homeowners each year.
The reporting obligation applies specifically to what the rule calls a specified passenger vehicle loan: financing used to buy a new car, SUV, motorcycle, or similar personal-use vehicle with its final assembly in the United States, secured by a first lien on the vehicle. Loans that do not meet those conditions, including loans on vehicles assembled abroad or loans not secured by the vehicle itself, fall outside both the deduction and the new reporting requirement.
The final regulation carries a regulatory effective date of November 9, 2026, but that date governs the rule’s formal legal status rather than when lenders start counting interest for reporting purposes. The reporting clock that matters to borrowers is the calendar year in which the interest was received, which is why interest paid during 2025 still falls under the simpler transitional relief while interest paid during 2026 falls under the full form requirement described in the final rule.
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Why the Reporting Requirement Exists
The car-loan interest deduction itself, created under the same 2025 law that produced the tips and overtime deductions, lets qualifying borrowers deduct up to $10,000 a year in vehicle-loan interest, with the benefit phasing out for higher earners. When the deduction first took effect for interest paid in 2025, the IRS had no independent way to check the interest figures borrowers reported on their returns, because no third-party form existed yet to verify them, the same gap that would exist for mortgage interest if lenders never sent Form 1098. IRS Notice 2025-57 addressed that gap for the transition year, allowing lenders to satisfy their 2025 reporting duty with a simple statement showing the year’s total interest rather than a formal information return.
The newly finalized regulation replaces that transitional approach starting with interest received in calendar year 2026. From that point forward, lenders must use the standardized reporting form rather than an informal statement, and they must also file a copy with the IRS rather than only providing it to the borrower. That gives the agency the same automated matching capability for car-loan interest that it has long used for mortgage interest, wage income, and investment income: a computer match between what a taxpayer claims on a return and what a third party separately reported.
How Borrowers Filing 2026 Returns Should Prepare
Borrowers who financed a qualifying vehicle should expect their lender to send the new statement early in 2027, alongside other year-end tax documents such as W-2s and 1099s, covering interest paid during 2026. IRS guidance on the underlying deduction already spells out the eligibility rules: the vehicle must be for personal use, the loan must be secured by the vehicle, and the deduction phases out once modified adjusted gross income passes set thresholds. The new form does not change any of those eligibility rules; it simply gives the IRS a way to confirm the interest amount a borrower claims.
The practical effect for the 2026 tax-filing season, when returns covering 2026 income are due in 2027, is that a mismatch between what a borrower claims and what a lender reports becomes far easier for the IRS to flag automatically. Borrowers who plan to claim the deduction on their 2026 return have a straightforward way to protect themselves: match whatever figure they claim to the amount their lender’s new statement shows, rather than relying on an estimate from a monthly loan statement or an online account portal that may calculate interest differently.
The change is also relevant to retirees and older borrowers who cosign a vehicle loan for an adult child or grandchild, or who finance a car themselves on a fixed income. Whoever is the named borrower on a qualifying loan, and therefore the one whose Social Security number appears on the lender’s new statement, is the person who can claim the deduction; a cosigner who is not the primary borrower on the loan generally cannot claim interest the primary borrower already deducts. Reviewing loan paperwork now, before the first statements arrive in early 2027, can prevent confusion over which household member is entitled to claim the deduction on a shared or cosigned loan.
This article was produced with the assistance of AI and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
