Schedule 1-A is a new IRS form introduced for 2025 tax returns. It allows eligible taxpayers to claim four new deductions created by the One Big Beautiful Bill Act. These deductions are available whether you itemize or take the standard deduction.
Important: These are deductions, not tax credits. They reduce your taxable income, not the amount of tax you owe directly.
What Deductions Can You Claim?
Schedule 1-A includes four key deductions:
1. No Tax on Tips
- Maximum Deduction: $25,000
- Who Qualifies: Workers in occupations that customarily receive tips
- Income Phaseout: Begins at $150,000 MAGI (single) / $300,000 (joint)
- Requirements: Valid SSN; tips must be voluntary and reported
2. No Tax on Overtime
- Maximum Deduction: $12,500 (single) / $25,000 (joint)
- Who Qualifies: Employees paid overtime (only the “premium” portion)
- Income Phaseout: Same as tips deduction
- Requirements: Must be W-2 income; valid SSN
3. Car Loan Interest Deduction
- Maximum Deduction: $10,000
- Who Qualifies: Buyers of new vehicles assembled in the U.S.
- Income Phaseout: Begins at $100,000 MAGI (single) / $200,000 (joint)
- Requirements: Loan must originate in 2025; VIN must be listed
4. Enhanced Deduction for Seniors
- Fixed Deduction: $6,000 (per eligible taxpayer age 65+)
- Income Phaseout: Begins at $75,000 MAGI (single) / $150,000 (joint)
- Requirements: Age 65+ by end of 2025; valid SSN
How to Use the Form
- Attach Schedule 1-A to your Form 1040 or 1040-SR.
- Enter your Modified Adjusted Gross Income (MAGI) in Part I.
- Complete each section for the deductions you qualify for.
- The total deduction amount will be entered on line 13b of Form 1040.
Tip: Keep records like pay stubs, tip logs, car loan documents, and proof of age to support your claims.
Things to Keep in Mind
- These deductions are temporary (2025–2028).
- Income limits apply—higher earners may receive reduced or no benefit.
- Payroll taxes still apply to tip and overtime income.
- State taxes may not follow federal deduction rules.
Timeline
- January 2026: First year Schedule 1-A will be filed with tax returns.
- October 2025: IRS will finalize the form and publish official instructions.