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Certificate of Insurance for Small Business: What It Is and How to Get One

June 3, 2026 No Comments

You’ve won a new contract. The client asks for a certificate of insurance before you can start. Now what?

A certificate of insurance (COI) is a one-page document that summarizes your business insurance coverage — policy types, limits, effective dates, and the insurer’s name. It’s proof that your business is insured, and it’s required by clients, landlords, lenders, and government agencies more often than most small business owners expect.

What Information Is on a COI?

Field	What It Shows
Insured	Your business name and address
Insurer(s)	Name of the insurance company issuing each policy
Policy Type	General liability, commercial auto, workers’ comp, etc.
Policy Number	Unique identifier for each active policy
Coverage Limits	Per occurrence and aggregate limits for each policy
Effective Dates	Start and end dates of each policy
Certificate Holder	The entity requesting the certificate
Additional Insured	Third parties covered under your policy (if applicable)

The standard form used for most COIs is the ACORD 25, which is a standardized certificate template accepted across industries.

Who Requires a Certificate of Insurance?

Commercial landlords — Before signing a lease, most require proof that you carry general liability and property insurance, and they want to be listed as an additional insured.

Clients and general contractors — Before starting a project or signing a service contract, clients often require minimum coverage levels. If you’re a subcontractor, the GC almost always requires one.

Government contracts and permits — City or state permits for certain work (construction, events, food service) typically require a COI.

Lenders (SBA loans) — As discussed with hazard insurance, lenders require proof of coverage on collateralized assets.

How to Get a Certificate of Insurance

Contact your insurance agent or broker — they issue COIs on your behalf. Most can send one within hours.
Provide the certificate holder’s information — the name and address of whoever is requesting it.
Specify if additional insured status is needed — this is a policy endorsement, not just a name on the COI.
Request the COI be emailed directly to the requesting party if needed.

Most insurers and brokers can generate a COI at no cost as part of your policy. Some online platforms (like Next Insurance or Simply Business) let you generate and share COIs instantly through an app or dashboard.

Additional Insured vs. Certificate Holder: What’s the Difference?

Term	What It Means	Practical Impact
Certificate Holder	Named on the COI as the requesting party	Gets notified if policy is cancelled
Additional Insured	Added to your policy with their own coverage rights	Can make claims under your policy

Adding someone as an additional insured is a more substantial commitment than just naming them as a certificate holder. It may come with an additional premium depending on your insurer and policy type.

Common Mistakes to Avoid

Sending an expired COI. Always double-check the policy effective dates before submitting. If your policy renewed, you’ll need a new certificate.

Confusing certificate holder with additional insured. Many clients request both — make sure your agent knows exactly what’s being asked.

Not reading the coverage requirements. Some contracts specify exact minimum limits (e.g., $2M general liability). Make sure your policy meets those before sending the COI.

Getting a COI for coverage you don’t actually have. A COI only reflects real, active policies. Misrepresenting coverage is fraud.

A certificate of insurance is simply proof of something you hopefully already have. The key is making sure your actual coverage meets what’s being asked — and having a responsive agent who can get documents out quickly when a deal depends on it.

In Finance

Small Business Umbrella Insurance: Extra Protection When It Matters Most

June 3, 2026 No Comments

Your general liability policy has a limit. Most small business policies cap at $1 million per occurrence and $2 million in aggregate. That sounds like a lot — until you face a serious lawsuit.

Small business umbrella insurance kicks in when your underlying policies are exhausted. It provides an extra layer of liability coverage — typically $1 million to $5 million — on top of your existing general liability, commercial auto, and employers’ liability policies. And it usually costs far less than you’d expect.

How Umbrella Insurance Actually Works

Think of your standard liability policies as the first line of defense. The umbrella sits above them.

Step	What Happens
1. Claim is filed	A customer sues your business for $1.8M in damages
2. Primary policy pays first	Your $1M general liability policy pays out its full limit
3. Umbrella covers the gap	Your umbrella policy covers the remaining $800,000
4. You pay nothing out of pocket	Provided total claim is within umbrella limits

Without an umbrella, that $800,000 gap comes out of your business assets — and potentially your personal assets if you’re a sole proprietor or there’s a personal guarantee involved.

What Does a Commercial Umbrella Policy Cover?

An umbrella policy extends coverage across your existing liability policies. It typically covers:

What’s Covered	Example
Excess general liability	Slip-and-fall lawsuit exceeding your GL policy limit
Excess commercial auto liability	Multi-vehicle accident with injuries above auto policy limit
Excess employers’ liability	Employee injury lawsuit exceeding workers’ comp coverage
Certain claims excluded from primary policies	Some advertising injury or defamation claims

What it does NOT cover: Professional errors (that’s E&O insurance), intentional acts, property damage to your own business, or claims in excess of the umbrella’s own limits.

How Much Does Small Business Umbrella Insurance Cost?

Coverage Amount	Avg. Annual Cost	Best For
$1 million umbrella	$300 – $600/year	Very small businesses, low risk
$2 million umbrella	$450 – $800/year	Most small businesses
$5 million umbrella	$700 – $1,500/year	Higher-risk industries, more assets

For most small businesses, a $1M–$2M umbrella policy costs less than $600/year — making it one of the best value purchases in commercial insurance.

Does Your Small Business Actually Need an Umbrella Policy?

Not every business needs one immediately. Here’s a quick assessment:

Business Characteristic	Umbrella Recommended?
Frequent customer/public interaction (retail, restaurant, events)	Yes — high foot traffic = higher liability exposure
Vehicles used for business deliveries or travel	Yes — auto accidents can be very costly
Employees working in clients’ homes or facilities	Yes — liability shifts when off your premises
Sole online business with no public interaction	Maybe — depends on revenue and asset value
Client contracts requiring high liability limits	Yes — umbrella helps you meet $5M+ contract requirements

Things to Know Before You Buy

You must have underlying policies first. An umbrella doesn’t stand alone — you need active general liability, commercial auto (if applicable), and employers’ liability policies in place. The umbrella insurer will specify minimum limits on each.

Same insurer vs. different insurer. Buying the umbrella from the same insurer as your underlying policies is simpler. Buying from a different insurer is possible but can create coordination complications during claims.

Coverage gaps are real. If your underlying policy excludes something, the umbrella typically excludes it too. Read both policies together to understand true coverage.

A small business umbrella policy is one of the most cost-effective ways to protect everything you’ve built. For under $50/month, you get protection that could mean the difference between surviving a major lawsuit and losing your business entirely.

In Finance

Vermont Business Insurance: What’s Required and What’s Worth Carrying

June 2, 2026 No Comments

Vermont business insurance requirements are straightforward: workers’ compensation is mandatory for any business with one or more employees (full-time, part-time, or seasonal), and businesses with commercial vehicles must carry commercial auto insurance meeting state minimums. Most other coverages — general liability, professional liability, cyber, property — are recommended but not legally required. The exception: certain regulated industries (construction contractors, healthcare providers, financial services) face additional state-specific licensing and insurance requirements.

Vermont is also unique nationally as the largest captive insurance domicile in the United States, hosting over 600 captive insurance companies as of recent state filings. For larger businesses (typically $5M+ in revenue), Vermont’s captive structure can be a meaningful tool for self-insurance and risk management — though it’s overkill for most small businesses. The Vermont Department of Financial Regulation publishes current information on business insurance requirements and licensed insurers in the state, making it the right starting point for any compliance-related questions.

Vermont Insurance Requirements at a Glance

Coverage	Required?	Who Needs It
Workers’ compensation	Yes (1+ employees)	All employers, including part-time/seasonal
Commercial auto liability	Yes (for business vehicles)	Vehicles used for business purposes
General liability	No (recommended)	All businesses serving the public
Professional liability	Industry-specific	Doctors, lawyers, accountants, consultants
Property insurance	No (recommended)	Businesses with physical assets
Cyber liability	No (recommended)	Businesses handling customer data
Unemployment insurance	Yes (via state)	All employers (paid through state)
Disability insurance	No state mandate	Optional for owners and employees

Workers’ Comp: Vermont’s Strict Rule

Vermont is one of the strictest states on workers’ compensation: coverage is required from the first employee, with very limited exceptions. Sole proprietors and partners can elect to be excluded from their own policy, but they cover any other workers — including family members in many cases — and including 1099 contractors if the work relationship resembles employment.

The penalties for non-compliance:

Fines up to $250 per day per uninsured employee
Stop-work orders that shut down operations
Personal liability for employee injuries
Possible criminal charges in serious cases

Vermont workers’ comp is sold through the private market, with Vermont’s State Insurance Department setting rates and rules but private insurers writing policies.

Industry-Specific Requirements

Several Vermont-licensed industries face additional insurance requirements:

Industry	Additional Requirement
Construction contractors	Surety bonds, additional liability
Healthcare providers	Malpractice/professional liability
Real estate brokers	Errors and omissions coverage
Childcare facilities	Specific liability coverage minimums
Restaurants serving alcohol	Liquor liability

Check with the relevant state licensing board for current minimum requirements in your industry.

Captive Insurance: Vermont’s Unique Position

Vermont established its captive insurance law in 1981 and has since become the largest captive domicile in the United States. A captive is essentially a self-insurance vehicle owned by the business it insures — used by mid-size and large companies to manage risk more efficiently than buying commercial coverage.

For most small businesses, captive insurance isn’t relevant. It becomes worth considering at:

$5M+ in premium-equivalent risk costs
Specific niche industries with limited commercial coverage availability
Multi-entity businesses wanting consolidated risk management

If you’re a $500K revenue business in Vermont, this isn’t your tool. If you’re a $50M revenue business, it’s worth a conversation with a captive specialist.

Typical Cost Ranges in Vermont

Coverage	Annual Cost (Small Business)
Workers’ comp (varies by industry)	$0.10–$5.00 per $100 of payroll
General liability	$400–$1,500
BOP (general liability + property)	$750–$2,500
Commercial auto	$1,200–$2,500 per vehicle
Cyber liability	$500–$2,500

A typical Vermont small business with 3 employees and $300K in revenue might spend $3,000–$6,000 annually on full insurance coverage.

Working with Vermont Insurance Brokers

Vermont’s small market means most insurance is sold through independent agents and brokers. Benefits of working with a local Vermont broker:

Familiarity with Vermont-specific requirements
Relationships with Vermont-based insurers
Knowledge of industry-specific regulations
Local claims service

The state requires all insurance brokers to be licensed through the Vermont Department of Financial Regulation. You can verify any broker’s license through the department’s online database.

Common Vermont Business Insurance Mistakes

Misclassifying employees as 1099 contractors to avoid workers’ comp. Vermont labor authorities aggressively investigate this.

Buying only the legally required minimum. Workers’ comp alone doesn’t protect you from customer lawsuits, property damage, or cyber incidents.

Skipping cyber coverage. Vermont businesses are not exempt from data breach exposure.

Not reviewing coverage annually. Vermont rates and minimums change; a policy that fit three years ago may be inadequate now.

Bottom Line

Vermont business insurance starts with mandatory workers’ compensation for any business with employees, then adds optional but practical coverages — general liability, property, cyber — based on your industry and risk exposure. The state’s unique captive insurance market is irrelevant to most small businesses but worth knowing about as you grow. Get at least two quotes from Vermont-licensed brokers and update coverage annually as your business changes.

In Finance

Health Insurance Small Business Owners: Five Real Paths to Coverage

June 2, 2026 No Comments

Small business owners have five practical paths to health insurance: an individual ACA Marketplace plan, coverage through a spouse’s employer plan, sponsoring a group plan that includes the owner, an ICHRA (Individual Coverage Health Reimbursement Arrangement), or a professional association plan. Which one is right depends on family situation, business size, income level, and how many employees you’d want to cover alongside yourself.

The most important factor for most owners is whether you’re covering just yourself (or yourself plus family) or you also need to cover employees. Single-owner businesses with no employees usually do best with a Marketplace plan or spousal coverage. Businesses with employees often benefit from a group plan or ICHRA arrangement that covers everyone including the owner. The HealthCare.gov small business resource center publishes side-by-side comparisons of small employer coverage options, which is the most current reference for federal small business health insurance options.

The 5 Paths Compared

Path	Best For	Key Limitation
ACA Marketplace plan	Solo owners, owners without group eligibility	Premium based on personal income
Spouse’s employer plan	Owners married to W-2 employees	Dependent on spouse staying employed
Group plan (owner-sponsored)	Businesses with 2+ employees	Must offer to employees too
ICHRA	Businesses wanting flexibility without sponsoring a plan	Newer arrangement; administrative complexity
Association health plan	Members of qualifying associations	Availability varies by industry and state

Path 1: ACA Marketplace

The Marketplace (HealthCare.gov or your state exchange) is open to self-employed people and small business owners without group coverage. Key features:

Pre-existing conditions can’t be excluded
Subsidies available if household income falls within eligible range
Plans available in metal tiers (Bronze through Platinum)
Enrollment during open enrollment (Nov 1–Jan 15 typically) or qualifying events

The self-employed health insurance deduction lets eligible self-employed individuals deduct premium costs from their adjusted gross income, which can offset the cost meaningfully.

Path 2: Spousal Coverage

If your spouse has employer coverage, joining their plan is often the lowest-cost option, especially if their employer pays a large share of dependent premiums. Considerations:

Employer plans often have lower out-of-pocket maximums than Marketplace plans
Spousal access depends on the employer’s eligibility rules
Spousal carve-out provisions exist at some employers — verify before assuming access
If you have employees, you may still want a separate plan for them

Path 3: Group Plan with Owner Included

If you have at least one W-2 employee besides yourself, you can typically sponsor a group health plan that covers both employees and owners. Key points:

Group rates often beat individual rates for healthier groups
Tax-deductible as a business expense
Sets you up to attract and retain employees
SHOP (Small Business Health Options Program) provides federal small business marketplace

A business with 25 or fewer employees may qualify for the Small Business Health Care Tax Credit, which can be substantial.

Path 4: ICHRA (Newer Option)

An Individual Coverage HRA lets an employer reimburse employees for individually purchased health insurance, pre-tax. The employer sets the monthly contribution amount; employees buy their own Marketplace plans.

Pros:

More flexibility than group plans
Predictable cost (employer sets the contribution)
Employees can choose plans matched to their needs

Cons:

Administrative complexity
Employees navigate their own plan selection
Newer; less broker familiarity

Path 5: Association Health Plans

Some industry associations, chambers of commerce, and professional groups offer access to group health coverage for members. Examples include the National Federation of Independent Business (NFIB) and various trade associations.

Availability varies by state and association. Worth checking if your industry has an association option, as group buying power can produce better rates.

The Self-Employed Health Insurance Deduction

For Marketplace and other individually-purchased health insurance, eligible self-employed taxpayers can deduct the full premium cost from their taxable income — even without itemizing. The deduction is limited to the net profit of the business and doesn’t apply if you (or your spouse) had access to a subsidized employer plan during the same period.

This deduction makes the after-tax cost of self-employed health insurance significantly lower than the headline premium suggests.

What to Watch For

Open enrollment timing. Missing it usually means waiting a full year unless you have a qualifying life event.

Network adequacy. Marketplace plans sometimes have narrow networks. Verify your doctors are in-network before enrolling.

Out-of-pocket maximums. Lower-tier Marketplace plans can have high deductibles. Match the deductible to what you can realistically pay if something happens.

HSA-eligible plans. Pairing a high-deductible plan with an HSA can be tax-efficient if you’re healthy and want to save for future healthcare costs.

Bottom Line

Small business owners have multiple viable paths to health coverage. The right choice depends on family structure, business size, and income. Solo owners typically do best with the Marketplace or spousal coverage. Owners with employees often benefit from sponsoring a group plan or setting up an ICHRA. Don’t skip the self-employed health insurance deduction — it can offset 22%–37% of premium costs depending on your tax bracket.

In Finance

Business Insurance for Online Retailers: The Coverage Your Storefront Doesn’t Need

June 1, 2026 No Comments

Online retailers face a different risk profile than brick-and-mortar stores, and the insurance coverage needed reflects that. The core policies most e-commerce businesses carry are general liability, product liability, cyber liability, and a business owner’s policy (BOP) that bundles property and liability coverage. Depending on your products and scale, you may also need professional liability (errors and omissions), inland marine (for inventory in transit), and commercial auto if you operate business vehicles.

The risks that make online retailers different: you don’t have foot traffic (so slip-and-fall claims are rare), but you have higher exposure to product liability, shipping issues, customer data breaches, and platform-related disputes. According to the Insurance Information Institute, cyber-related losses are among the fastest-growing categories of business insurance claims, making cyber liability essentially non-optional for any business handling customer payment data.

The Core Policies for Online Retailers

Policy	What It Covers	Why Online Retailers Need It
General liability	Bodily injury, property damage to third parties	Required by most marketplaces (Amazon, Shopify Pro)
Product liability	Harm caused by products you sell	Critical if you make or private-label products
Cyber liability	Data breaches, ransomware, customer payment exposure	You’re storing or processing customer data
Business owner’s policy (BOP)	Bundles general liability + property	Cost-efficient for most under-$5M revenue businesses
Inland marine	Inventory in transit or in temporary storage	Protects shipments and 3PL-held inventory
Commercial auto	Vehicles used for business	Only if you operate delivery vehicles

Why Marketplace Selling Adds Specific Requirements

If you sell on Amazon, Walmart, Etsy, or similar marketplaces, the platform itself may require specific coverage:

Amazon Pro Sellers with $10,000+ monthly sales must carry $1 million in commercial liability
Walmart Marketplace requires $1M general liability for many product categories
Shopify Plus doesn’t mandate coverage but contractually shifts liability to merchants

The marketplace requirement is the minimum, not the recommendation. If you sell a product that hurts someone, the lawsuit follows your business, not the platform.

Product Liability Is the Big One

Even resellers face product liability exposure. The doctrine of “strict liability” in most states means anyone in the chain of distribution can be sued for a defective product — including a small Shopify store that just resold something.

Categories with high product liability exposure:

Cosmetics and skincare (allergic reactions, contamination)
Food and supplements (contamination, mislabeling, allergic reactions)
Children’s products (safety standards, choking hazards)
Electronics (fire, electrical injury)
Apparel (chemical sensitivities, fire safety on children’s items)

If your products fall in these categories, $1M general liability is the floor, not the ceiling. Many retailers in these categories carry $2M–$5M.

Cyber Liability Specifics

Cyber coverage typically includes:

First-party coverage — your costs to respond to a breach (forensics, notification, credit monitoring for customers)
Third-party coverage — your liability to customers whose data was exposed
Cyber extortion — ransomware payments and recovery
Business interruption — lost revenue if your site goes down due to attack

For a small e-commerce business handling 10,000+ customer records, basic cyber coverage typically costs $500–$2,500 per year.

Typical Cost Ranges for E-Commerce Businesses

Revenue Range	Typical Annual Premium for Full Stack
Under $250K	$1,500–$3,500
$250K–$1M	$2,500–$7,500
$1M–$5M	$5,000–$15,000
$5M–$10M	$15,000–$40,000
$10M+	Custom commercial coverage

Premiums vary significantly by product category — selling vitamins costs more to insure than selling phone cases.

When to Add Professional Liability

If your business gives advice, recommendations, or services along with products — fitness coaches selling supplements, consultants selling courses, marketing agencies selling tools — professional liability (errors and omissions) protects against claims that your advice or service caused financial harm.

Common Mistakes Online Retailers Make

Skipping product liability for “I just resell” reasoning. Strict liability doesn’t care if you made it or not.

Underinsuring on cyber. Most breach responses cost $100,000+; a $50,000 cyber policy isn’t meaningful coverage.

Buying coverage only when a platform forces it. Amazon’s $1M minimum isn’t a reasonable maximum.

Ignoring jurisdiction issues. Selling nationwide exposes you to product liability laws in every state.

Bottom Line

Online retailers need a layered insurance stack — general liability, product liability, cyber, and a BOP at minimum — and the cost is modest relative to the exposure. The single highest-ROI move is matching product liability limits to your actual product category risk. A vitamin business needs more coverage than a phone-case business. Get quotes from at least two commercial insurance brokers familiar with e-commerce, and update coverage annually as your revenue and product mix change.

In Finance

Student Loan Forgiveness Excess Payments: What Happens to the Money You Paid Over

May 27, 2026 No Comments

When a federal student loan is forgiven – through PSLF, IDR forgiveness, or a borrower defense action — any payments made beyond the required threshold are typically refunded to the borrower. For PSLF specifically, that means if you made qualifying payments beyond your 120th payment before forgiveness was processed, those excess payments are refunded after forgiveness is granted. For IDR forgiveness (20 or 25 years of qualifying payments), the same general principle applies.

The refund process isn’t automatic and it isn’t fast. Refunds happen after forgiveness is officially processed, which is itself often delayed by backlogs. Borrowers in the PSLF buyback queue often wait many months to a year for forgiveness, then additional weeks or months for excess-payment refunds. The Department of Education’s Federal Student Aid site is the official source for refund and forgiveness policy updates, and the specific process varies by program.

How Excess Payment Refunds Work by Program

Forgiveness Program	Excess Payment Treatment	Typical Refund Timeline
PSLF (Public Service Loan Forgiveness)	Refunded after 120 qualifying payments	Months after forgiveness is processed
IDR Forgiveness (IBR, PAYE, etc.)	Refunded after qualifying repayment period	Months after forgiveness processed
Borrower Defense	Refunded if school misconduct found	Highly variable
TPD Discharge (disability)	Refunded under specific conditions	Variable
Bankruptcy discharge (rare)	Discretionary, case-by-case	Highly variable

The general principle across all programs: you don’t have to “earn back” payments that exceeded what was required for forgiveness. The federal government refunds them after the forgiveness is officially granted.

How the PSLF Excess Payment Refund Works

PSLF requires 120 qualifying monthly payments (10 years) while working full-time for a qualifying employer. If you’ve made 125 qualifying payments by the time forgiveness is processed — because, for example, your application sat in a backlog while you continued making payments — those 5 extra payments are refunded.

The refund process:

You reach 120 qualifying payments and submit your PSLF application
The Department of Education processes your application (months to over a year)
Forgiveness is officially granted
Excess payments from after your 120th qualifying payment are refunded
Refund issued via direct deposit or check

The math: if your monthly payment was $400 and you made 8 extra payments, you’d receive a refund of $3,200.

What Counts as “Excess”

Not every payment you made counts as excess. The definition is specific:

Payments made after your 120th qualifying payment for PSLF
Payments made after your qualifying repayment period for IDR forgiveness
Payments made during certain forbearance or deferment periods that were later credited

Payments made before you reached the threshold count toward forgiveness — they’re not “excess.” Only payments that pushed your total beyond what was required can be refunded.

The Timeline Reality

Refunds aren’t instant. The typical sequence:

Stage	Approximate Timing
Submit forgiveness application	Day 0
Application enters processing queue	Days to weeks
Application reviewed and decision made	Months (currently delayed)
Forgiveness officially granted	Days after decision
Excess payment refund issued	Weeks to months after forgiveness

Some borrowers in the recent PSLF backlog have reported waiting more than a year from application to forgiveness, then another 2–6 months for excess-payment refunds. The total wait can approach 18 months.

What Borrowers Should Do While Waiting

Don’t stop making payments. Some borrowers, anticipating forgiveness, have stopped paying — which can cause delinquencies and credit damage.

Document everything. Keep records of every payment, every employment certification, every account statement.

Submit your buyback application if eligible. PSLF Buyback allows you to retroactively pay for forbearance or deferment months. Submitting starts the clock.

Watch the consolidation deadline. Borrowers wanting to keep access to legacy IDR plans need to consolidate before July 1, 2026.

Tax Treatment of Refunds

Refunds of excess payments aren’t taxable income — you’re getting back money you already paid with after-tax dollars. The forgiveness itself, however, may be taxable depending on the program and the year:

PSLF forgiveness has historically been tax-free at the federal level (and remains so under current rules)
IDR forgiveness federal tax treatment changed starting January 1, 2026 — forgiveness through certain IDR plans is again taxable income
State tax treatment varies — some states tax federal loan forgiveness as income, others don’t

This is one area where consulting a tax professional makes sense, especially for IDR forgiveness in higher tax brackets.

What If You Don’t Receive Your Refund

If forgiveness has been officially granted and excess-payment refunds haven’t arrived after 90 days:

Contact your loan servicer directly
Check your account on StudentAid.gov for status
File a complaint with the Department of Education’s Ombudsman Group if servicer response is inadequate
Submit a complaint to the CFPB

Most refund delays resolve with a direct call to the servicer. Persistent problems escalate effectively through the federal ombudsman process.

Bottom Line

Excess payments on forgiven federal student loans are refundable — you don’t lose the money you paid past your forgiveness threshold. The process is slow, especially during the current backlog, and the refunds don’t arrive automatically. Keep making payments while you wait, document everything, and follow up if more than 90 days pass after forgiveness is granted without your refund arriving.

In Finance

Auto Loan Interest Deduction: How to Claim It on Your 2025 Tax Return

May 27, 2026 No Comments

To claim the new auto loan interest deduction on your 2025 tax return, you’ll need to file Form 1040 with Schedule 1-A (Additional Deductions), Part IV — “No Tax on Car Loan Interest” — and include the VIN of your qualifying vehicle. The deduction is above-the-line, meaning you can claim it whether you take the standard deduction or itemize. The maximum deduction is $10,000 per tax year, available for tax years 2025 through 2028 under the One Big Beautiful Bill Act.

For 2025 returns (filed in spring 2026), lenders weren’t yet required to send borrowers a Form 1098-VLI, so you’ll calculate the deduction from your lender’s existing interest statements. Starting with the 2026 tax year, the IRS has confirmed that lenders are required to issue Form 1098-VLI to borrowers who paid $600 or more in qualifying interest, making the claim process more straightforward. This is general information — for your specific tax situation, consult a qualified tax professional.

Step-by-Step Process for the 2025 Tax Year

Step 1: Confirm your vehicle qualifies.

The vehicle must be:

New (no used vehicles)
Have undergone final assembly in the United States
Under 14,000 lbs GVWR
Purchased and financed after December 31, 2024

Verify final assembly through the NHTSA VIN Decoder before assuming eligibility.

Step 2: Calculate total qualifying interest paid in 2025.

Pull together your lender statements (monthly or annual) showing interest paid during the calendar year. For 2025 returns, an annual statement, monthly statements, or even a borrower-accessible online portal showing total interest qualifies as documentation.

Step 3: Confirm your income falls within eligibility.

Income phaseouts apply:

Filing Status	Phaseout Begins	Fully Phased Out
Single	$100,000 MAGI	$150,000 MAGI
Married Filing Jointly	$200,000 MAGI	$250,000 MAGI

If your income is in the phaseout range, you’ll claim a reduced deduction. Above the upper threshold, you can’t claim the deduction at all.

Step 4: Apply the phaseout calculation if needed.

Within the phaseout range, the deduction reduces proportionally. The IRS provides a worksheet in the Schedule 1-A instructions to calculate the exact allowable amount.

Step 5: Complete Schedule 1-A, Part IV.

Fill in:

The VIN of the qualifying vehicle
Total qualified vehicle loan interest paid
Any phaseout adjustment
Final allowable deduction

Step 6: Transfer to Form 1040.

The Schedule 1-A total flows to your Form 1040 as an above-the-line adjustment, reducing your Adjusted Gross Income.

What Records to Keep

Hold these documents for at least three years after filing (the standard IRS audit window):

Original loan documents showing loan origination date
Documentation of the vehicle VIN
Lender statements showing interest paid in the tax year
Vehicle purchase agreement showing it was new (not used)
Any phaseout calculation worksheets

If your loan was refinanced during the year, keep documentation showing both the original and refinanced loan.

Common Mistakes to Avoid

Claiming interest on a used vehicle. Used vehicles don’t qualify under any circumstances.

Claiming interest on a non-US-assembled vehicle. Even a brand-new luxury vehicle doesn’t qualify if its final assembly was outside the United States. Always verify the VIN.

Forgetting the phaseout calculation. Taxpayers in the phaseout range who claim the full deduction risk an IRS adjustment notice.

Including lease payments. Leases don’t generate qualifying interest under this provision.

Claiming interest on loans originated before 2025. Only loans originated after December 31, 2024 qualify.

What Changes for 2026 and Later

Starting with the 2026 tax year, your lender must send you a Form 1098-VLI (Vehicle Loan Interest Statement) by January 31 each year if you paid $600 or more in qualifying interest during the prior year. The form will show total qualified interest paid, simplifying the calculation.

For 2025 returns specifically, lenders had transition relief — they could use existing statements, annual statements, or borrower portals to document interest paid.

Tax Software vs. Manual Filing

Major tax preparation software (TurboTax, H&R Block, FreeTaxUSA) added support for the new deduction in their 2025 tax-year products. The software handles the phaseout calculation automatically.

If you’re filing manually, the Schedule 1-A instructions include the phaseout worksheet.

How Much It Saves

The deduction is above-the-line, so it directly reduces your taxable income. Your savings equal your marginal tax rate times the deduction amount.

Interest Paid	22% Bracket	32% Bracket
$2,000	$440	$640
$4,000	$880	$1,280
$6,000	$1,320	$1,920
$10,000 (max)	$2,200	$3,200

State tax may add additional savings depending on whether your state conforms to federal rules.

Bottom Line

Claiming the auto loan interest deduction on your 2025 return takes Schedule 1-A, your lender’s interest statement, and a few minutes of verification. Most filers will save several hundred to a few thousand dollars in federal tax. The process gets easier starting with the 2026 tax year when Form 1098-VLI becomes standard. Until then, keep clean records and use tax software that handles the phaseout automatically if your income is in the affected range.

In Finance

PSLF Backlog 2026: Where Things Stand and What Borrowers Can Do

May 27, 2026 No Comments

As of early 2026, the Public Service Loan Forgiveness (PSLF) program has significant backlogs in two specific application categories. 88,170 PSLF Buyback applications were pending as of February 28, 2026, per Department of Education filings — a number that has grown by roughly 5,000 over the prior two months. Income-Driven Repayment (IDR) applications, by contrast, are improving: about 576,000 were pending in late February, down from over 734,000 at the end of 2025. Borrowers in the PSLF Buyback queue report wait times of 14+ months for decisions.

The backlog reflects a combination of factors: a surge in applications following Biden-era PSLF reforms, the collapse of the SAVE repayment plan (officially blocked by a federal appeals court in March 2026), administrative changes between presidential administrations, and the operational complexity of reviewing buyback applications individually. Borrowers in qualifying public service jobs should keep working, certify employment annually, and watch the Federal Student Aid website for PSLF program updates — the policy landscape continues to evolve.

The Backlog by the Numbers

Application Type	Pending (Feb 28, 2026)	Trend
PSLF Buyback applications	88,170	Growing slowly
IDR applications	576,609	Falling (down from 734K in Dec 2025)
PSLF forgiveness applications (general)	Tens of thousands	Variable

PSLF Buyback — the option that lets borrowers retroactively pay for months missed due to forbearance or deferment — is the slowest-moving category. The Department has been receiving about 4,000+ new buyback applications per month while deciding only about 2,500, meaning the buyback backlog continues to grow.

What Caused the Backlog

Surge in eligibility. Biden-era reforms expanded PSLF eligibility retroactively, allowing hundreds of thousands of borrowers to count payments that previously didn’t qualify.

SAVE plan collapse. The SAVE plan, enacted in 2023, was officially blocked by a federal appeals court in March 2026. The 7.5 million enrolled borrowers were directed to choose new plans within 90 days, generating a wave of new IDR applications.

Administrative transition. Policy shifts between administrations introduced changes that affected processing.

Buyback complexity. Each application requires individual review of employment history, payment records, and forbearance periods — work that doesn’t lend itself to automation.

Major Changes Borrowers Need to Track

End of SAVE. SAVE borrowers must enroll in a different repayment plan. Remaining options: IBR (Income-Based Repayment), ICR, and the new Repayment Assistance Plan (RAP), launching summer 2026.

RAP launch. Under the One Big Beautiful Bill Act, new borrowers will only have access to RAP as their income-driven option. RAP includes a $10 minimum monthly payment, a principal subsidy for PSLF borrowers, and more generous treatment of unpaid interest than older plans.

Consolidation deadline. Borrowers who want to keep access to legacy IDR plans need to consolidate before July 1, 2026.

Higher buyback costs. PSLF buyback costs are now calculated using the IBR formula rather than the blocked SAVE formula — making buyback more expensive for many borrowers.

What Borrowers in the Backlog Can Do

Keep working in qualifying employment. Every month of qualifying public service work counts toward the 120-month total. Don’t leave a qualifying job because of processing delays.

Submit the Employment Certification Form annually. This creates documentation that supports your eventual forgiveness.

Apply for buyback if eligible. Even with long wait times, getting your application in the queue starts the clock.

Monitor your account. Watch FSA.gov and your servicer’s portal for updates. Be ready to respond quickly to document requests.

Consider consolidation before July 1, 2026 if you want to preserve legacy IDR plan access.

What Not to Do

Don’t stop making payments. Unless you’re explicitly on paused or forbearance status, missing payments creates new problems without speeding processing.

Don’t pay third-party “forgiveness services.” PSLF applications are free through the Department of Education.

Don’t switch plans hastily. With ongoing legal and administrative changes, a quick plan change based on one news cycle can lock you into worse terms.

The Bigger Picture

Since PSLF began discharging meaningful numbers of loans in 2022, over 1.2 million borrowers have received roughly $90.6 billion in forgiveness through January 2026 — averaging about $75,000 per borrower. The program is working at scale. The backlog reflects the program’s growth, not failure, though the wait is genuinely painful for borrowers stuck in queue.

Bottom Line

The PSLF backlog in 2026 is real and growing for buyback applications, but processing continues and forgiveness still happens. Borrowers in qualifying employment should keep applying, certify employment annually, and watch the deadlines around the SAVE wind-down and RAP rollout. Patience and documentation are your best tools while waiting.

In Finance

Construction Loan Lenders: Where to Borrow When You’re Building From the Ground Up

May 26, 2026 No Comments

Construction loan lenders fall into three main groups — community banks and credit unions, specialty construction lenders, and a handful of larger national banks with construction divisions. Community banks and credit unions actually dominate this market because they hold loans on their own books rather than selling them, which gives them flexibility to underwrite construction projects that don’t fit standard mortgage rules. The biggest national banks (Chase, Wells Fargo, Bank of America) generally do less construction lending than people expect.

Construction loans differ from regular mortgages in three important ways: they’re short-term (typically 12–18 months during construction), they fund in draws tied to construction milestones rather than as a single lump sum, and they convert into a permanent mortgage upon completion. The Consumer Financial Protection Bureau publishes a clear plain-language explanation of how construction loans work, which is worth reading before you start your application.

The Three Lender Categories

Lender Type	Typical Loan Size	Strength	Drawback
Community banks/credit unions	$200K–$2M	Local relationships, builder familiarity, portfolio flexibility	Limited geography, slower decisions
Specialty construction lenders	$300K–$5M+	Construction expertise, faster builder relationships	Higher rates, less flexibility on terms
Large national banks	$500K+ (often jumbo)	Brand, product menu	Less construction focus, stricter rules

For most owner-occupied builds in the $300K–$800K range, community banks and credit unions are the right first call.

How Construction Loans Actually Work

A typical construction loan has four phases:

1. Approval and setup. Borrower qualifies, lender approves, builder is vetted, construction budget is finalized. Closing happens before construction begins.

2. Construction phase (12–18 months). Funds release in draws tied to construction milestones — foundation poured, framing complete, mechanical rough-ins done, interior finishes. The borrower pays interest only on drawn amounts, not the full loan.

3. Conversion to permanent mortgage. Once construction is complete and the home passes final inspection, the loan converts to a standard 15- or 30-year mortgage. With a true construction-to-permanent loan, there’s only one closing (saves thousands in fees).

4. Permanent mortgage phase. Normal monthly principal-and-interest payments going forward.

The draw process is one of the most underappreciated parts. Each draw requires inspections and lender approval before funds release, which can create timing pressure with contractors expecting prompt payment.

What Construction Lenders Require

Documentation	Why
Builder license and references	Confidence in the contractor
Construction contract	Defines scope, cost, timeline
Detailed budget	Line-item breakdown of costs
Architectural plans	What’s being built
Soil tests, surveys, permits	Risk verification
Larger down payment (20–25%)	Reduces lender risk during construction
Higher credit score (often 680+)	Compensates for construction risk

The 20–25% down payment is meaningful. Many buyers comfortable buying an existing home at 5–10% down find construction loans require significantly more cash upfront.

Rates and Costs

Construction loan rates have two components:

Phase	Typical Rate
Construction phase	Prime + 1–2% (variable)
Permanent loan after conversion	Locks at market rate at closing

The construction-phase rate is often variable, tied to prime — one reason builders aim to keep timelines short. Closing costs run 2%–5% of the loan amount; construction-to-permanent loans avoid a second closing, saving $3,000–$7,000.

Where to Start Your Search

Your local credit union if you’re a member — relationship pricing often beats banks
Community banks in your area — especially ones known for working with local builders
Specialty construction lenders — firms with construction-specific divisions
National banks — only if your loan size or location requires them

The single best signal of a good construction lender is the answer to “how many construction loans does your branch close per year?” If the answer is “a handful,” look elsewhere.

Common Pitfalls

Underestimating the budget. Construction routinely runs 10%–20% over the initial estimate. Loans built tight to the original budget require change orders or additional funding.

Builder problems. A delayed builder stretches the construction phase, accruing more variable-rate interest. Vet your builder as carefully as your lender.

Permanent rate uncertainty. If your construction-to-permanent loan doesn’t lock the permanent rate at initial closing, you bear interest rate risk during construction. Ask explicitly.

Insufficient down payment. Many buyers underestimate the 20–25% requirement and end up unable to close.

Bottom Line

Construction loan lenders are mostly community banks, credit unions, and specialty firms. Start with local institutions where you already have relationships. Bring a strong builder, a buffered budget, and 20%–25% down. The process is more involved than a standard mortgage, but for a custom build, there’s no alternative path.

In Finance

Car Loan Interest Deduction: The 40-Year Comeback Story

May 26, 2026 No Comments

For 38 years, personal car loan interest was not deductible on federal taxes. The deduction quietly disappeared in 1986, when the Tax Reform Act eliminated the deductibility of most personal interest — credit card interest, auto loan interest, and other consumer borrowing all stopped qualifying. Mortgage interest survived the cut because Congress specifically carved it out. Everything else became non-deductible, and that’s where things stood for nearly four decades.

That changed in 2025. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, brought back a limited car loan interest deduction for tax years 2025 through 2028 — up to $10,000 in qualifying interest per year, above-the-line, available whether or not you itemize. The deduction has eligibility constraints (new vehicles only, US final assembly required, income phaseouts), but the principle of allowing some personal interest deduction is the most significant change to consumer tax treatment in a generation. The Federal Register published the proposed regulations explaining how the deduction works, and lenders will issue Form 1098-VLI to borrowers starting with the 2026 tax year.

The 1986 Backstory

Before 1986, all personal interest — auto, credit card, personal loans — was deductible. The Tax Reform Act of 1986 was one of the most significant tax overhauls in U.S. history. Among its goals: broaden the tax base and simplify the code.

The Act eliminated the deduction for most personal interest, phasing it out gradually over four years. By 1990, only mortgage interest remained deductible (along with investment interest and certain business interest). Auto loan interest, like credit card interest, became fully non-deductible.

The argument at the time was that personal interest deductions encouraged consumer borrowing — an outcome lawmakers wanted to discourage in favor of saving.

Why the Deduction Came Back in 2025

The new car loan interest deduction wasn’t introduced in isolation. The OBBBA includes a cluster of consumer-targeted tax provisions:

No tax on tips (a specific deduction for tip income)
No tax on overtime (a deduction for overtime pay)
Car loan interest deduction
Other targeted middle-income deductions

The car loan piece was framed as both consumer relief and an industrial policy lever — the US-final-assembly requirement directly favors American-built vehicles, which aligns with broader manufacturing policy goals.

How the New Deduction Compares to the Pre-1986 Version

Aspect	Pre-1986	Post-2025
Vehicles covered	All auto loans	New, US-assembled only
Used vehicles	Deductible	Not eligible
Annual cap	None	$10,000/year
Income phaseouts	None	Yes (varies by filing status)
Itemization required	Yes	No (above-the-line)
Time-limited	No	Yes — sunsets in 2028

The new version is narrower in two important ways: it limits to new vehicles and adds income phaseouts. It’s broader in one important way: you don’t need to itemize to claim it.

Who Benefits Most

The deduction’s design points the benefit toward:

Middle-income households (phaseouts limit upper-income benefit)
Buyers of new vehicles, not used
Buyers of US-assembled vehicles
Households with significant car loan interest (larger loans, higher rates)

A taxpayer in the 22% bracket who pays $4,000 in qualifying interest saves $880 federally. A taxpayer in the 32% bracket saves $1,280 on the same interest. State tax may add additional savings depending on conformity rules.

Who Doesn’t Benefit

Buyers of used vehicles, regardless of how much interest they pay
Lessees (leases aren’t loans, no qualifying interest)
High-income earners above the phaseout thresholds
Buyers of non-US-assembled new vehicles
Anyone with loans originated before January 1, 2025

The Political Context

The deduction has supporters and critics. Supporters argue it:

Provides meaningful middle-class tax relief
Supports US manufacturing
Restores parity with mortgage interest treatment

Critics argue it:

Distorts vehicle purchasing decisions
Favors new-vehicle buyers (typically higher-income)
Adds complexity to the tax code
Sunsets in 2028, creating a cliff

Bipartisan Policy Center analysis suggests about 1.2 million tax returns claimed the deduction in its first filing season (spring 2026), well below the full potential population — likely because eligibility rules eliminate many auto loans and many buyers don’t know about the deduction.

Bottom Line

The car loan interest deduction is back after nearly 40 years, with limits and conditions that make it look quite different from its pre-1986 predecessor. For buyers of new, US-assembled vehicles in the eligible income range, it’s a meaningful tax benefit worth several hundred to a few thousand dollars per year. For everyone else — used car buyers, lessees, buyers of foreign-assembled vehicles, or high earners — it doesn’t apply. The deduction sunsets at the end of 2028 unless extended.