IRS Form 1040 (Schedule 1-A) – Additional Deductions – If you’re filing your 2025 taxes in 2026, you might be eligible for brand-new deductions that could significantly lower your taxable income. Introduced by the One Big Beautiful Bill Act (also known as the Working Families Tax Cut), IRS Schedule 1-A (Form 1040) allows taxpayers to claim four “below-the-line” deductions: no tax on tips, no tax on overtime, no tax on car loan interest, and an enhanced deduction for seniors. These temporary provisions, available from 2025 to 2028, are designed to provide relief for workers and retirees, and they can be claimed whether you itemize deductions or take the standard deduction.
In this comprehensive guide, we’ll break down everything you need to know about Schedule 1-A, including eligibility, how to calculate your deductions, and step-by-step instructions for filing. We’ll draw from official IRS sources and trusted tax experts to ensure accuracy. You can download the official PDF form here: https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf.
What Is IRS Schedule 1-A (Form 1040)?
Schedule 1-A is a new attachment to Form 1040, 1040-SR, or 1040-NR, created specifically for reporting additional deductions under the One Big Beautiful Bill Act. Unlike traditional itemized deductions on Schedule A, these are “below-the-line” deductions that reduce your taxable income after calculating your Adjusted Gross Income (AGI). This means they don’t affect AGI-based benefits like certain credits or phaseouts, making them particularly advantageous.
The form is divided into six parts:
- Part I: Modified Adjusted Gross Income (MAGI) – Calculates your MAGI, which determines phaseout limits for the deductions.
- Part II: No Tax on Tips – For qualified tip income.
- Part III: No Tax on Overtime – For eligible overtime pay.
- Part IV: No Tax on Car Loan Interest – For interest on qualified vehicle loans.
- Part V: Enhanced Deduction for Seniors – For taxpayers aged 65 or older.
- Part VI: Total Additional Deductions – Sums up the amounts and transfers to Form 1040, line 13b (or 13c for 1040-NR).
These deductions are phased out based on MAGI thresholds, and most require a valid Social Security Number (SSN) and joint filing if married.
Who Needs to File Schedule 1-A?
You should file Schedule 1-A if you’re eligible for any of the four deductions and want to claim them on your 2025 tax return. It’s not mandatory for everyone—only those who qualify and choose to reduce their taxable income. Key eligibility notes:
- Available to U.S. taxpayers filing Form 1040, 1040-SR, or 1040-NR.
- Can be claimed alongside the standard deduction or itemized deductions on Schedule A.
- Temporary: Only for tax years 2025–2028.
If your MAGI exceeds certain limits (e.g., $150,000 for single filers or $300,000 for joint), your deductions may be reduced or eliminated. Consult IRS Notice 2025-69 for detailed rules.
The Four New Additional Deductions Explained
Here’s a detailed look at each deduction, including limits and requirements.
1. No Tax on Tips Deduction
This deduction excludes qualified tips from taxable income for workers in tip-reliant occupations like bartenders, servers, drivers, and caddies (about 70 eligible jobs).
- Maximum Deduction: Up to $25,000 per return.
- Eligibility: Tips must be reported on Forms W-2, 1099-NEC, 1099-MISC, or 1099-K. Requires valid SSN and joint filing if married.
- Phaseout: Begins at $150,000 MAGI for single ($300,000 joint), fully phased out at higher levels.
- How to Calculate: Enter qualified tips on Part II, subtract phaseout amount based on MAGI.
2. No Tax on Overtime Deduction
Aimed at hourly workers, this deducts the “premium” portion of overtime pay (e.g., time-and-a-half or double time).
- Maximum Deduction: $12,500 for single filers ($25,000 joint).
- Eligibility: Overtime from qualified employers; reported on W-2 (box 14 optional for 2025). Valid SSN required.
- Phaseout: Starts at $150,000 MAGI single ($300,000 joint).
- How to Calculate: Report overtime premium on Part III; apply phaseout formula.
Federal employees may also qualify—check IRS FAQs for details.
3. No Tax on Car Loan Interest Deduction
This allows deduction of interest on loans for qualified passenger vehicles.
- Maximum Deduction: $10,000 per return.
- Eligibility: Interest on loans for personal vehicles (provide VIN); cannot duplicate deductions claimed elsewhere (e.g., business use on Schedule C).
- Phaseout: Begins at $100,000 MAGI single ($200,000 joint).
- How to Calculate: Enter qualified interest on Part IV; reduce by phaseout percentage.
4. Enhanced Deduction for Seniors
Provides extra relief for older taxpayers.
- Base Deduction: $6,000 per qualifying senior (taxpayer and/or spouse).
- Eligibility: Born before January 2, 1961 (age 65+ in 2025). Valid SSN required; joint filing if married.
- Phaseout: Reduced by 6% for every dollar of MAGI over $75,000 single ($150,000 joint).
- How to Calculate: Enter on Part V; apply reduction based on MAGI.
How to Fill Out Schedule 1-A: Step-by-Step?
Filling out Schedule 1-A starts with calculating your MAGI in Part I.
- Part I – MAGI: Add AGI from Form 1040 line 11b, plus exclusions like foreign earned income (Form 2555) or Puerto Rico income.
- Parts II–V: Enter eligible amounts for each deduction, then subtract phaseouts.
- Part VI: Total the deductions and carry to Form 1040.
- Attach supporting forms like W-2 or 1099 if needed.
Use tax software like TurboTax or TaxSlayer for guided walkthroughs, as they handle phaseouts automatically. For manual filing, refer to the draft instructions on IRS.gov.
| Deduction | Max Amount (Single/Joint) | Phaseout Start (Single/Joint) | Required Documents |
|---|---|---|---|
| Tips | $25,000 | $150K/$300K | W-2, 1099 forms |
| Overtime | $12.5K/$25K | $150K/$300K | W-2 (box 14 optional) |
| Car Loan Interest | $10K | $100K/$200K | Loan statements, VIN |
| Seniors | $6K per person | $75K/$150K | Birth date proof |
Common Mistakes and Tips for Maximizing Your Deductions
- Don’t Double-Dip: Ensure car loan interest isn’t claimed elsewhere.
- Track Records: Keep detailed records of tips, overtime, and interest payments.
- Check MAGI Early: Use an online calculator to estimate phaseouts.
- For Expats: These deductions may interact with foreign income exclusions—consult a tax pro.
- Employer Reporting: For 2025, overtime and tips might not be separately reported on W-2s, so calculate manually.
Final Thoughts on Schedule 1-A for 2025 Taxes
Schedule 1-A represents a welcome tax break for millions of Americans, potentially saving you thousands on your 2025 return. Whether you’re a tipped worker, overtime earner, car owner, or senior, review your eligibility now. Always use the latest IRS guidance, and consider professional help if your situation is complex. For more details, visit IRS.gov or download the form PDF linked above.
Stay updated on tax changes—file early in 2026 to maximize refunds!