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The Treasury Department and IRS have finalized regulations regarding the deduction of up to $10,000 in personal car loan interest by individuals for tax years 2025 through 2028. This includes regulations on information returns required to be filed by a lender or other person engage in a trade or business who receives $600 or more of qualified interest during the calendar year. The final regulations adopt the proposed regulations published in January 2026 (NPRM REG-113515-25) with some changes in response to public comments.

The Treasury Department and IRS have finalized regulations regarding the deduction of up to $10,000 in personal car loan interest by individuals for tax years 2025 through 2028. This includes regulations on information returns required to be filed by a lender or other person engage in a trade or business who receives $600 or more of qualified interest during the calendar year. The final regulations adopt the proposed regulations published in January 2026 (NPRM REG-113515-25) with some changes in response to public comments.

Qualified Personal Vehicle Loan Interest

For tax years beginning in 2025 through 2028, a noncorporate taxpayer may claim a deduction of up to $10,000 for qualified personal vehicle loan interest (QPVLI) paid or accrued during the tax year on a specified passenger vehicle loan (SPVL) incurred by the taxpayer for the purchase of an applicable personal vehicle (APV) for personal use. Generally, interest includes an amount paid, received, or accrued as compensation for the use or forbearance of money under the debt instrument.

The final regulations clarify that QPVLI also includes prepaid interest in the form of points and deferred or capitalized interest. In addition, it may include origination-related or financing-related charges, prepayment penalties, late-payment charges, default-related charges, and similar fees, if characterized as an interest expense for federal income tax purposes.

Secured by First Lien

Interest is QPVLI only if it is paid or accrued on debt for the purchase of an APV for personal use that is secured by a first lien. The final regulations clarify that an SPVL is secured by a first lien with the first voluntary security interest recorded against the vehicle. Any involuntary liens are disregarded even if given temporary higher priority at a later date.

A vehicle also may be considered secured by a first lien even if the lien has not yet been perfected or recorded due to short-term delays arising under State or local law. It may also be considered secured by a first lien where the lien is removed in connection with the taxpayer no longer owning the vehicle, but the taxpayer continues to be liable for the loan (repossession or insurance payout).

Purchase of Applicable Passenger Vehicle

An SPVL is qualified only to the extent the debt is incurred for the purchase of a new vehicle and any other items or amounts customarily financed in the same purchase transaction (for example, vehicle service plans, extended warranties, sales taxes, and vehicle-related fees). Any portion of a loan for items or amounts not customarily financed in the purchase are not qualified.

The taxpayer must allocate the debt on a pro rata basis. Whether items are customarily financed and directly related to the purchase of the vehicle is determined on an industry-wide basis and not on the particular financing terms. The final rules, however, expand the list of examples of items customarily financed in an APV purchase. The final regulations also maintain that debt incurred for negative equity in a prior purchased vehicle is not incurred for the purchase of an APV.

The requirement that an APV must be a new vehicle under the loan documentation refers to the lender’s classification of the vehicle for purposes of its financing programs. The original use of the vehicle must commence with the taxpayer. However, original use does not commence with a dealer if the vehicle is held primarily for sale to customers in the ordinary course of its trade or business. Original does not commence with a lessee if the lessee purchases the vehicle during or at the end of the lease term.

Information Reporting

Any lender or other person who, in the course of that trade or business, receives from any individual interest aggregating $600 or more for any calendar year on an SPVL, must report the receipt of interest on Form 1098-VLI to the IRS and the payee. The final regulations affirm that lenders are required to include only interest received on an SPVL for the purchase of an APV, the first use of which begins with the payee. This is required by statute and may require the lender to collect information it currently does not collect. The lender must file Form 1098-VLI for each SPVL.

T.D. 10054

The Treasury Department and IRS have issued proposed regulations providing that a private school is not eligible for Federal income tax exemption under section 501(c)(3) if it considers race, color, or national or ethnic origin in any of its educational, admissions, scholarship, athletic, or other school-administered policies. Any such consideration, under the proposed regulation subsection, would be considered de facto racial discrimination. The proposed rules would apply to taxable years beginning after May 31, 2027.

The Treasury Department and IRS have issued proposed regulations providing that a private school is not eligible for Federal income tax exemption under section 501(c)(3) if it considers race, color, or national or ethnic origin in any of its educational, admissions, scholarship, athletic, or other school-administered policies. Any such consideration, under the proposed regulation subsection, would be considered de facto racial discrimination. The proposed rules would apply to taxable years beginning after May 31, 2027.

Racial Nondiscrimination

The proposed regulations would treat all race-based consideration in private education as contrary to a fundamental public policy, regardless of its purpose, including remedial or diversity-related objectives. This restriction does not inclulde policies or actions designed to eliminate prejudice or other forms of discrimination. The rules would cover private primary and secondary schools, colleges, professional or trade schools, and universities. The rules specifically do not include governmental units, any agency or instrumentality of a governmental unit, or any organization owned or operated by such an agency or instrumentality.

Application to Private Schools

To qualify for tax exemption, a private school could not consider race, color, or national or ethnic origin in:

• (1) Educational or admissions policies
• (2) Scholarship or loan programs
• (3) Athletic or other school-supported programs

The proposal would not prevent religious schools from maintaining religious missions or selecting students based solely on religious affiliation. If finalized, Rev. Proc. 75-50 would also be modified to remove provisions permitting certain race-based preferences for minority groups.

The proposed regulations would add §1.501(c)(3)-2 and apply to taxable years beginning after May 31, 2027.

Proposed Regulations, NPRM REG-119986-25

IR 2026-103

A Notice of Final Partnership Adjustment (FPA) issued by the IRS to a partnership was timely under Code Sec. 6235 because the partnership and IRS had agreed to extend the limitations period for making partnership adjustments. It was determined that the extended period under Code Sec. 6235(a)(1) controlled because the statute permits adjustments until the latest of the periods specified in Code Sec. 6235(a). Accordingly, the partnership’s motion for summary judgment was denied.

A Notice of Final Partnership Adjustment (FPA) issued by the IRS to a partnership was timely under Code Sec. 6235 because the partnership and IRS had agreed to extend the limitations period for making partnership adjustments. It was determined that the extended period under Code Sec. 6235(a)(1) controlled because the statute permits adjustments until the latest of the periods specified in Code Sec. 6235(a). Accordingly, the partnership’s motion for summary judgment was denied.

The partnership, which was subject to the centralized partnership audit (CPA) regime, challenged an FPA disallowing a charitable contribution deduction. The partnership argued that the FPA was issued outside the applicable limitations period because the 330-day period following the notice of proposed partnership adjustment had expired. However, the parties had previously executed an agreement extending the limitations period for partnership adjustments under Code Sec. 6235(b).

Further, it was concluded that the periods specified in Code Sec. 6235(a) were not sequential deadlines. The statutory phrase “later of” required use of the latest applicable period, and an agreed extension under Code Sec. 6235(b) extended the limitations period for making adjustments, including issuance of the FPA. Because the FPA was mailed before expiration of the agreed extended period, the FPA was timely.

Katanga Properties, LLC, 167 TC No. 10, Dec. 62,899

The Doug LaMalfa Federal Disaster Tax Relief Certainty Act has been signed into law by President Trump.

The Doug LaMalfa Federal Disaster Tax Relief Certainty Act has been signed into law by President Trump.

The law (H.R. 5366) allows victims of federally declared disasters to deduct qualified losses above $500 per disaster without itemizing and removes the 10 percent adjusted gross income threshold for those losses. A fact sheet on the bill can be found here.

Under the law, this treatment of personal casualty loss is available until Jan. 1, 2027.

It also excludes wildfire relief payments from taxable income regardless of when they are received, so long as the wildfire disaster declaration occurs after Dec. 31, 2014, and before Jan. 1, 2027.

President Trump signed the bill into law on Sept. 11, 2026.

The IRS has modified automatic accounting method change procedures for research or experimental expenditures and certain residential construction contracts. Rev. Proc. 2026-32 modifies sections 7 and 19 of Rev. Proc. 2025-23 to reflect changes made by the One, Big, Beautiful Bill Act (OBBBA).

The IRS has modified automatic accounting method change procedures for research or experimental expenditures and certain residential construction contracts. Rev. Proc. 2026-32 modifies sections 7 and 19 of Rev. Proc. 2025-23 to reflect changes made by the One, Big, Beautiful Bill Act (OBBBA).

For research expenditures, the procedure modifies accounting method changes under Code Secs. 174 and 174A. Code Sec. 174 continues to require capitalization and 15-year amortization for foreign research expenditures. Code Sec. 174A generally allows a current deduction for domestic research expenditures paid or incurred in tax years beginning after December 31, 2024.

The procedure also revises rules governing adjustments associated with accounting method changes. It coordinates certain Code Sec. 481 adjustments with the OBBBA transition method for recovering unamortized domestic research expenditures. It also extends through tax years beginning before 2028 waivers of certain eligibility restrictions for specified automatic changes.

Further, the IRS provides automatic accounting method changes for residential construction contracts affected by the OBBBA amendments to Code Sec. 460. Taxpayers may change from the percentage-of-completion method to an exempt contract method for qualifying contracts entered into in tax years beginning after July 4, 2025. Certain taxpayers may also change their treatment of costs under Code Sec. 263A.

The modified procedures generally apply to Form 3115, Application for Change in Accounting Method, filed after September 4, 2026. Special transition rules apply to certain previously filed Forms 3115.

Rev. Proc. 2026-32

After acknowledging earlier this year that hackers breached one of its popular online apps, the IRS has promised more identity theft protections in the 2016 filing season. The IRS, along with partners in the tax preparation community, has identified and tested more than 20 new data elements on returns to help detect and prevent identity-theft related filings. The agency is also working to prevent criminals from accessing tax-time financial products.

After acknowledging earlier this year that hackers breached one of its popular online apps, the IRS has promised more identity theft protections in the 2016 filing season. The IRS, along with partners in the tax preparation community, has identified and tested more than 20 new data elements on returns to help detect and prevent identity-theft related filings. The agency is also working to prevent criminals from accessing tax-time financial products.

Identity theft

Combatting identity theft is on ongoing process as criminals continue to create new ways of stealing personal information and using it for their gain. Tax-related identity theft typically peaks early in the filing season. Criminals file bogus returns early so taxpayers remain unaware you have been victimized until they try to file a return and learn one already has been filed. Between 2011 and 2015, the IRS identified 19 million suspicious returns and prevented the issuance of some $60 billion in fraudulent refunds. During the 2015 filing season, the IRS detected and stopped more than 3.8 million suspicious returns.

However, criminals continue to probe for weaknesses. In May, the IRS discovered that criminals had breached its Get Transcript app. Return information of as many as 300,000 taxpayers may have been compromised, the IRS reported.

New protections

In March, the IRS began working with the return preparation community and the tax software industry to develop a coordinated response to tax-related identity theft. The stakeholders, the IRS reported, have focused on a number of areas including improved validation of the authenticity of taxpayers and information on returns, increased information sharing to improve refund fraud detection and expand prevention, as well as more sophisticated threat assessment and strategy development to prevent risks and threats.

One outgrowth of the process is the creation of new data elements that can be shared at the time of filing with the IRS to help authenticate a taxpayer's identity. The IRS explained that there are more than 20 new data components. They will be submitted with electronic return transmissions during the 2016 filing season. Some of the data elements are

• Reviewing the transmission of the tax return, including the improper and/or repetitive use of internet addresses from which the return is originating;
• Reviewing the time it takes to complete a tax return, so computer mechanized fraud can be detected.
• Capturing metadata in the computer transaction that will allow review for identity theft related fraud.

"We are taking new steps upfront to protect taxpayers at the time they file and beyond," IRS Commissioner John Koskinen said at a news conference in Washington, D.C. "Thanks to the cooperative efforts taking place between the industry, the states and the IRS, we will have new tools in place this January to protect taxpayers during the 2016 filing season."

Financial products

Previously, the IRS announced that it would limit the number of direct deposit refunds to a single financial account or pre-paid debit card to three. Fourth and subsequent valid refunds will convert to paper checks and be mailed to the taxpayer. The IRS emphasized that it will continue to bolster its efforts to curb tax-time financial product fraud.

If you have any questions about tax-related identity theft, please contact our office.

IR-2015-117, FS-2015-23

For a business to start writing off the cost of depreciable equipment and property, it is necessary that the equipment be placed in service. To write off costs in 2015, the equipment must be placed in service by December 31, 2015. The "placed-in-service" requirement applies, for example, for taking depreciation, especially first-year bonus depreciation, under Code Sec. 168, expensing of the cost of property under Code Sec. 179, and other write-offs such as the investment tax credit under Code Sec. 46.

For a business to start writing off the cost of depreciable equipment and property, it is necessary that the equipment be placed in service. To write off costs in 2015, the equipment must be placed in service by December 31, 2015. The "placed-in-service" requirement applies, for example, for taking depreciation, especially first-year bonus depreciation, under Code Sec. 168, expensing of the cost of property under Code Sec. 179, and other write-offs such as the investment tax credit under Code Sec. 46.

The actual date an asset is placed in service is particularly important in the case of year-end acquisitions. Thus, determining when property is placed in service is an important concept for year-end planning.

Under the current legislative regime, some tax provisions are renewed from year-to-year but have not been permanently extended (such as bonus depreciation and enhanced Code Sec. 179 expensing). The year that the property is placed in service thus determines whether or not the tax benefit is available in addition to the year for which a business claims the benefit.

Depreciation begins in the tax year that an asset is placed in service. An asset is placed in service (for purposes of computing depreciation or claiming the investment credit) on the date that it is in a condition or state of readiness for a specifically assigned function on a regular, ongoing basis, for use in a trade or business, for the production of income, in a tax-exempt activity, or in a personal activity. The placed-in-service date is not necessarily the date that the property is acquired. This distinction should also be kept in mind where a tax provision has requirements for the acquisition date as well as the placed-in-service date.

An asset actually put to use in a trade or business is clearly placed in service. If the asset is not yet put to use, it is still considered placed in service if the taxpayer has done everything needed to put the asset to use. For example, a canal barge was placed in service in the year acquired, even though it was not used until the following year because the canal was frozen.

A building that is intended to house machinery and equipment is placed in service when the building's construction is substantially complete, whether or not the machinery and equipment have been placed in service. A federal district court concluded that a building designed to be a retail store was placed in service when the building was substantially complete, even though the building was not yet open to the public. For a building (as opposed to equipment) the issuance of a certificate of occupancy is a key factor that indicates the building has been placed in service.