Schedule 1-A Explained (2026): The Four New Deductions for Tips, Overtime, Car Loans, and Seniors

Schedule 1-A (Form 1040), titled "Additional Deductions," is the new IRS schedule for claiming the four deductions created by the One Big Beautiful Bill Act: up to $25,000 in qualified tips, $12,500 in overtime premium ($25,000 joint), $10,000 in car loan interest, and $6,000 per person age 65 or older. All four are available whether or not you itemize, all four phase out at higher incomes, and the combined total lands on Form 1040, line 13b. The schedule debuted with 2025 returns filed in early 2026 and runs through tax year 2028.

Key takeaways:

• Schedule 1-A carries four deductions in six parts: Part II tips ($25,000 cap per return, even for joint filers), Part III overtime ($12,500 single / $25,000 MFJ), Part IV car loan interest ($10,000), Part V seniors ($6,000 per qualifying person)
• Every deduction stacks on top of your standard or itemized deduction; none of them lowers your AGI
• Tips and overtime phase out at $150,000 / $300,000 MAGI, car loan interest at $100,000 / $200,000, seniors at $75,000 / $150,000
• Married filing separately gets zero for tips, overtime, and the senior deduction; only car loan interest survives a separate return
• Do not confuse Schedule 1-A with Schedule 1 (Additional Income and Adjustments to Income); they are different forms with different jobs

Save this cheat sheet — key numbers in one image.

What Is Schedule 1-A (Form 1040)?

Schedule 1-A is the two-page attachment to Form 1040, 1040-SR, or 1040-NR that calculates the four "no tax on..." deductions enacted in July 2025 under the One Big Beautiful Bill Act (OBBBA). Rather than squeezing four new write-offs onto the main form, the IRS gave them a dedicated schedule, per IRS Fact Sheet FS-2026-04. The official Schedule 1-A PDF has six parts:

These are a new kind of deduction. Like the standard deduction, they reduce taxable income below the AGI line, so you can claim them alongside the standard deduction or itemized deductions on Schedule A. Unlike the adjustments on Schedule 1, they never reduce AGI itself. Each of the four also comes from its own new slice of the tax code: tips from IRC Section 224, overtime from IRC Section 225, car loan interest from the qualified passenger vehicle loan interest rules under Section 163, and the senior deduction from an OBBBA amendment to Section 151.

The Four New Deductions on Schedule 1-A: 2026 Numbers

Each deduction has its own cap, its own phase-out, and its own fine print. This table is the map; the three deep-dive guides cover eligibility line by line: No Tax on Tips, No Tax on Overtime, and the car loan interest deduction.

Two asymmetries in this table trip people up. The tips cap is per return: a married couple where both spouses earn tips still shares one $25,000 ceiling, while the overtime cap doubles to $25,000 for joint filers. And the car loan deduction is the only one of the four that a married-filing-separately taxpayer can claim at all.

All four run for tax years 2025 through 2028. The caps and thresholds are written into the statute and are not inflation-adjusted, so the same numbers apply for 2025, 2026, 2027, and 2028 unless Congress changes them.

Run Your Numbers Before You File

Schedule 1-A vs Schedule 1: Not the Same Form

Schedule 1-A and Schedule 1 are different attachments with nearly identical names, and search data shows filers constantly mixing them up. Schedule 1 (Additional Income and Adjustments to Income) is the pre-2025 form where you report income with no home on Form 1040 (business income, unemployment, gambling winnings) and claim above-the-line adjustments like student loan interest. Schedule 1-A exists only for the four OBBBA deductions.

The AGI distinction is the one with money attached. An adjustment on Schedule 1 (say, the deductible half of self-employment tax) lowers AGI, which can help you qualify for AGI-based breaks like IRA deductions or education credits. A Schedule 1-A deduction happens after AGI is already fixed, so it cuts your tax bill without improving your eligibility for anything AGI-tested.

How the MAGI Phase-Outs Work on Schedule 1-A

Part I of Schedule 1-A defines the MAGI used by all four phase-outs: your AGI from Form 1040 line 11b, plus any excluded Puerto Rico income, the foreign earned income and housing exclusions from Form 2555 (lines 45 and 50), and the American Samoa exclusion from Form 4563. For most filers none of those add-backs apply, so MAGI is simply AGI.

From there, three different phase-out formulas apply:

• Tips and overtime: the deduction drops $100 for every $1,000 of MAGI over $150,000 ($300,000 MFJ). The form rounds the excess down to the next whole $1,000 before multiplying, which works in your favor.
• Car loan interest: the deduction drops $200 for every $1,000 of MAGI over $100,000 ($200,000 MFJ), and the form rounds the excess up to the next whole $1,000, which works against you.
• Seniors: the $6,000 shrinks by a flat 6% of every dollar of MAGI over $75,000 ($150,000 MFJ), with no rounding step at all.

Why $500 Over the Line Costs Nothing on Tips but $200 on a Car Loan

The rounding directions are printed right on the form and produce opposite results at the margins. A single filer with $150,500 of MAGI claiming the tip deduction divides the $500 excess by $1,000, gets 0.5, and rounds down to 0: no reduction (Schedule 1-A line 11 says to decrease 0.05 to 0). A single filer with $100,500 of MAGI claiming car loan interest divides the same $500 excess by $1,000 and rounds up to 1, losing $200 of the deduction (line 28 says to increase 0.05 to 1). None of the top-ranking explainers mention this; the form itself is the source.

Worked Example: Tips Plus Overtime on One Return

Dana is a single server at a Seattle restaurant, paid $23 an hour with no tip credit. In 2026 she reports $14,200 in tips, works 200 overtime hours at time-and-a-half ($34.50), and her W-2 arrives in January 2027 with the new codes filled in. Her FLSA overtime premium is $11.50 per overtime hour, so 200 hours puts $2,300 in Box 12 under code TT.

Dana's MAGI is far below the $150,000 threshold, so no phase-out applies. Part II: tips of $14,200 are under the $25,000 cap, so line 13 is $14,200. Part III: her $2,300 premium is under the $12,500 cap, so line 21 is $2,300. Part VI, line 38: $16,500, carried to Form 1040 line 13b.

The tax math: standard deduction of $16,100 (single, 2026) plus the $16,500 from Schedule 1-A leaves taxable income of $24,500, inside the 12% bracket. The Schedule 1-A deductions save Dana 12% × $16,500 = $1,980 of federal income tax. Note what did not change: all $57,100 of her pay, tips and overtime included, still owed Social Security and Medicare tax through withholding, and her AGI stayed $57,100. The inline estimator above defaults to Dana's exact numbers, so you can swap in your own.

Worked Example: The Senior Deduction Phase-Out at 67

Victor is 67, single, and semi-retired. In 2026 he draws a $52,000 pension, withdraws $24,000 from a traditional IRA, and earns $13,500 from part-time work: AGI and MAGI of $89,500. He is over the $75,000 threshold, so Part V walks him through the phase-out:

Victor's deduction stack for 2026: the $16,100 standard deduction, plus the $2,050 additional standard deduction for age 65+ that existed before OBBBA, plus the new $5,130 from Schedule 1-A. Taxable income lands at $66,220, in the 22% bracket, so the Schedule 1-A piece alone saves him about $1,129. Had his MAGI reached $175,000, line 34 would hit $6,000 and the deduction would vanish entirely.

For couples the deduction is per person but the phase-out is computed once. Both spouses 67 with $170,000 of joint MAGI: the $20,000 excess × 6% = $1,200 reduction, so each spouse claims $4,800 on lines 36a and 36b, for $9,600 total. The IRS senior deduction eligibility page confirms the deduction stacks on top of both the regular and the age-65 standard deductions.

What Documentation You Need for Each Deduction

The 2025 filing season ran on transition relief; 2026 is the first year the reporting plumbing is mandatory. IRS Notice 2025-69 let employers skip separate W-2 reporting for 2025, which meant workers reconstructed amounts from pay stubs. For 2026 the W-2 does the work.

Three documentation details worth flagging. Tip earners must work in one of the 68 occupations on the IRS list of jobs that customarily received tips before 2025; the occupation code your employer reports must match. Self-employed people can claim qualified tips from a 1099-NEC, 1099-MISC, or 1099-K on line 5, but only up to the net profit of the business. And the car loan deduction requires the VIN on the return itself; a missing VIN is an easy e-file rejection. Building Jupid after watching 60,000+ small businesses at Anna Money, the pattern I saw most was people discovering a rule change a full filing season late; Schedule 1-A rewards checking your W-2 codes in January, not in April.

When Schedule 1-A Does NOT Help

The "no tax on" branding oversells all four deductions, and several groups get nothing:

• Married filing separately. Tips, overtime, and senior deductions all require a joint return if you are married. Only car loan interest (Part IV) works on a separate return.
• No valid Social Security number. Each deduction requires an SSN valid for employment; an ITIN is not enough.
• Payroll tax stays. None of the four touches Social Security or Medicare tax. Tips and overtime still owe FICA in full, and self-employed tip earners still owe 15.3% self-employment tax.
• AGI-tested benefits don't improve. Because line 13b sits below AGI, these deductions never help you qualify for IRA deductions, education credits, or other AGI-based breaks.
• Salaried-exempt workers and most contractors have no FLSA overtime premium to deduct, no matter how many hours they work.
• Used cars, leases, and pre-2025 loans produce zero car loan interest deduction.
• State income tax usually still applies; most states have not conformed to these federal deductions.
• 2024 and earlier returns. Schedule 1-A did not exist; nothing here is retroactive. And absent new legislation, all four deductions expire after tax year 2028.

Withholding is the other quiet catch: employers do not reduce paycheck withholding for these deductions, so the benefit typically shows up as a bigger refund. If you would rather see it during the year, adjust your W-4 and preview the effect in the take-home pay calculator.

Is Schedule 1-A Final? Where the Form Stands in August 2026

The 2025 Schedule 1-A is final and has been through a full filing season. The IRS posted the final form (catalog number 95872Q, created November 4, 2025) in time for 2025 returns, and published the explanatory Fact Sheet FS-2026-04 in March 2026. There is no standalone instruction booklet: the line-by-line instructions and example scenarios live inside the 2025 Form 1040 instructions.

As of early August 2026, the IRS has posted 2026 draft revisions for Schedule 1, Schedule A, and Schedule C, but not yet a 2026 draft of Schedule 1-A. That matters less than it sounds: every cap and threshold on the form is statutory and not indexed for inflation, so the 2026 numbers are identical. What actually changes for 2026 returns is the reporting layer (W-2 codes TT and TP become mandatory, ending the pay-stub reconstruction) and the senior birth-date test rolling forward one year. One piece still in flux: the car loan interest rules rest partly on proposed regulations under §1.163-16 published in January 2026, which could shift details when finalized.

Common Schedule 1-A Mistakes

• Deducting the whole overtime check. Part III takes only the FLSA premium: on $6,900 of time-and-a-half pay, Dana deducts $2,300, not $6,900.
• Assuming the tips cap doubles for couples. It doesn't. Line 7 caps tips at $25,000 per return for single and joint filers alike, while the overtime cap does double to $25,000 MFJ.
• Entering all 1099 tips without the net-profit limit. Line 5 caps self-employed tips at the net profit of the trade or business; a break-even side gig deducts nothing.
• Skipping Part I because you know your AGI. The phase-outs run off Schedule 1-A line 3 MAGI, which adds back Form 2555 exclusions; expats can be over a threshold their AGI hides.
• Forgetting the VIN. Line 22 requires the vehicle identification number for every loan claimed in Part IV.
• Double-deducting car loan interest. Interest already deducted on Schedule C, E, or F goes in column (ii) of line 22 and cannot be claimed again on Schedule 1-A.

Four Deductions, One Total: How Jupid Helps

Schedule 1-A rewards people who know their numbers before filing season: which W-2 codes to expect, how close MAGI sits to a phase-out, what a side gig's net profit allows. Jupid is an AI accountant that lives in WhatsApp and iMessage. Connect your bank and it categorizes income and expenses at 95.9% accuracy in real time, so questions like "how much have I earned in tips this year?" or "am I drifting past $150,000 MAGI?" get instant answers instead of an April surprise, and your filing is prepared automatically from books that are already clean. Try Jupid.

Action Checklist

• Pull your W-2 and find Box 12 codes TP (tips) and TT (overtime premium); for 2025, reconstruct from final pay stubs instead
• Confirm your job is on the IRS tipped-occupations list before claiming Part II
• Request a year-end interest statement from your auto lender and copy the VIN from your registration for Part IV
• Compute MAGI on Schedule 1-A Part I (AGI plus Form 2555/4563 and Puerto Rico add-backs)
• Check each phase-out: $150,000/$300,000 (tips, overtime), $100,000/$200,000 (car loan), $75,000/$150,000 (seniors)
• If married filing separately, switch to joint before claiming tips, overtime, or the senior deduction
• Carry Schedule 1-A line 38 to Form 1040 line 13b and attach the schedule

Sources

• Schedule 1-A (Form 1040), Additional Deductions — the final 2025 form; all line references, caps, and phase-out mechanics
• IRS Fact Sheet FS-2026-04: Schedule 1-A, what to know about the new form — part-by-part overview and eligibility
• 2025 Form 1040 instructions — Schedule 1-A line instructions and example scenarios
• IRS: Occupations that customarily and regularly received tips — the 68-occupation list for Part II
• IRS: Check your eligibility for the new enhanced deduction for seniors — senior deduction rules and stacking
• IRS: What to know about the No Tax on Overtime deduction — overtime caps and phase-out
• IRS Notice 2025-69 — 2025 transition relief for tips and overtime reporting
• IRC §224 (qualified tips) and IRC §225 (qualified overtime compensation) — the statutory deductions
• Proposed regulations, car loan interest deduction (§1.163-16) — QPVLI requirements and VIN reporting

---

This guide is for general educational purposes and does not constitute tax, legal, or accounting advice. Parts of the Schedule 1-A rules, including the car loan interest deduction, rest on proposed regulations and transition guidance that may change as the IRS finalizes them. For advice specific to your situation, consult a qualified tax professional.