Schedule 1-A Explained: The New Form for Tips and Overtime

Schedule 1-A is the new IRS form for four deductions created by the 2025 tax law: no tax on tips, no tax on overtime, no tax on car loan interest and the extra $6,000 senior deduction. You file it with your Form 1040 if you claim any of them. The total from the schedule lowers your taxable income, whether or not you itemize.

The form is officially called Schedule 1-A (Form 1040), Additional Deductions. It was first used for 2025 returns. All four deductions run from 2025 through 2028. Below is what each part asks for, how it flows to Form 1040 and the mistakes to avoid on your 2026 return.

Last updated October 27, 2026. This guide follows the 2026 draft Schedule 1-A, for returns filed in 2027. Line numbers could change before the final form comes out.

For every other change this year, see all the 2026 tax changes for your return, or the key numbers for your 2026 return on one page.

Schedule 1-A at a glance

For your 2026 return, filed in 2027, based on the 2026 draft Schedule 1-A. MAGI means modified adjusted gross income, figured in Part I.

Part II: No tax on tips
Most you can deduct	$25,000
Phase-out starts	$150,000 MAGI$300,000 married filing jointly
Part III: No tax on overtime
Most you can deduct	$12,500$25,000 married filing jointly
Phase-out starts	$150,000 MAGI$300,000 married filing jointly
Part IV: Car loan interest
Most you can deduct	$10,000
Phase-out starts	$100,000 MAGI$200,000 married filing jointly
Part V: Senior deduction
Per person 65 or older	$6,000
Phase-out starts	$75,000 MAGI$150,000 married filing jointly
Part VI: Total
Where it goes on the 2026 draft Form 1040	Line 13a

What is Schedule 1-A?

Schedule 1-A is an add-on to Form 1040, 1040-SR or 1040-NR. It works out four deductions that are new for 2025 through 2028. Each one has its own part, its own cap and its own income limit. The last part adds them up.

These deductions are not the same as itemized deductions on Schedule A. You can take them and still take the standard deduction. They also don’t lower your adjusted gross income (AGI). They lower your taxable income.

Who needs to file Schedule 1-A?

You only file Schedule 1-A if you claim at least one of these:

• Qualified tips in an occupation on the IRS list of tipped jobs
• Qualified overtime, the premium part of overtime the Fair Labor Standards Act requires
• Interest on a loan for a new car or other qualifying vehicle bought for personal use
• The senior deduction, if you or your spouse is 65 or older

For the tips, overtime and senior deductions, the person who qualifies needs a valid Social Security number, and married couples must file jointly. The car loan part has its own rules, covered below.

What goes in Part I?

Part I figures your modified adjusted gross income (MAGI). Every other part uses it to apply the income limits.

• Line 1: your AGI from Form 1040, line 11b.
• Lines 2a to 2e: add back income you excluded from Puerto Rico or under Form 2555 or Form 4563. Most people enter zero.
• Line 3: add them together. That is your MAGI. For most people it equals their AGI.

What goes in Part II, no tax on tips?

Part II is for qualified tips earned in a job on the IRS list at IRS.gov/TippedOccupations.

• Line 4: for each employer, enter the name, EIN and qualified tips from your W-2, box 12, code TP, or from Form 4137.
• Line 6: if you are self-employed and earned tips, enter them from Form 1099-NEC, 1099-MISC or 1099-K, limited by your net profit.
• Line 9: the deduction is capped at $25,000.
• Lines 10 to 14: the phase-out. Once MAGI passes $150,000 ($300,000 joint), you lose $100 for each full $1,000 over.
• Line 15: your tips deduction.

Want more on the tips rules? See no tax on tips in our 2026 tax changes guide.

What goes in Part III, no tax on overtime?

Part III is for qualified overtime. That is only the premium part of overtime the FLSA requires, like the “half” in time-and-a-half.

• Line 16: for each employer, enter the name, EIN and the amount in W-2, box 12, code TT.
• Line 18: rare cases reported on Form 1099-NEC, box 1d, or Form 1099-MISC, box 14.
• Line 21: the cap, $12,500 or $25,000 if married filing jointly.
• Lines 22 to 26: the phase-out. Over $150,000 MAGI ($300,000 joint), you lose $100 for each full $1,000 over.
• Line 27: your overtime deduction.

Example: Maria’s W-2 shows $6,000 in box 12, code TT. Her MAGI is $72,000. She enters $6,000 on line 16, it stays under the cap and she is under the income limit. Line 27 is $6,000.

For step-by-step examples, including double time and the income limit, read how to claim no tax on overtime.

What goes in Part IV, car loan interest?

Part IV is for interest on a loan for a qualifying vehicle. You list each vehicle’s VIN. The 2026 draft also asks two yes-or-no questions for each one:

• Did the original use of the vehicle start with you? A used vehicle does not qualify.
• Was the vehicle’s final assembly in the United States?

The loan must be taken out after December 31, 2024, secured by the vehicle and for personal use. Lease payments don’t count. Lenders may report the interest to you on the new Form 1098-VLI.

• Line 30: the cap is $10,000.
• Lines 31 to 35: the phase-out. Over $100,000 MAGI ($200,000 joint), you lose $200 for each $1,000 over, or part of $1,000.
• Line 36: your car loan interest deduction.

More detail is in the car loan section of our 2026 tax changes guide.

What goes in Part V, the senior deduction?

Part V gives up to $6,000 to each person 65 or older. This is on top of the regular extra standard deduction for age. For 2026, you qualify if you were born before January 2, 1962.

• Lines 37 to 41: the phase-out. Once MAGI passes $75,000 ($150,000 joint), the $6,000 drops by 6% of the amount over.
• Lines 42a and 42b: one line for you and one for your spouse, if both qualify.
• Line 43: your senior deduction, up to $12,000 for a couple.

Example: a single filer, age 70, has MAGI of $85,000. That is $10,000 over the limit. 6% of $10,000 is $600, so the deduction is $6,000 minus $600 = $5,400.

See the senior deduction in our 2026 tax changes guide for more.

How does Schedule 1-A flow to Form 1040?

Part VI, line 44, adds your four results: line 15 (tips), line 27 (overtime), line 36 (car loan interest) and line 43 (seniors). On the 2026 draft Form 1040, that total goes on line 13a. It is then added to your standard or itemized deduction and subtracted from your AGI to get taxable income.

On the 2025 form, the same total went on Form 1040, line 13b. If you are looking at last year’s return, that is why the line number changed.

Getting ready to file? Check our 2027 tax deadlines.

What are the most common Schedule 1-A mistakes?

• Deducting all of your overtime pay. Only the premium “half” counts, and for 2026 only what is in W-2 box 12, code TT.
• Counting state or union overtime. Only overtime the federal FLSA requires qualifies.
• Filing separately when married. Married filing separately can’t claim the tips, overtime or senior deductions.
• Using the wrong car. Used vehicles, leases and vehicles assembled outside the U.S. don’t qualify.
• Forgetting the income limits. Each part has its own phase-out, based on MAGI from Part I.
• Skipping it because you take the standard deduction. You can take these deductions either way.
• Using last year’s line numbers. The 2026 form has more lines, and the total moves to Form 1040, line 13a.

Schedule 1-A FAQ

About the author

Sources

• IRS: 2026 Schedule 1-A (Form 1040), draft
• IRS: 2025 Schedule 1-A (Form 1040)
• IRS: 2026 Form 1040, draft
• IRS: Tax deductions for working Americans and seniors
• IRS: Fact Sheet 2026-13, questions and answers on the overtime deduction
• IRS: 2026 Instructions for Forms W-2 and W-3, draft (box 12, codes TP and TT)
• 26 U.S.C. § 224 (qualified tips)
• 26 U.S.C. § 225 (qualified overtime)
• 26 U.S.C. § 163(h)(4) (passenger vehicle loan interest)
• 26 U.S.C. § 151(d)(5)(C) (senior deduction)

This article is general information, not tax advice for your situation. Tax rules can change, so talk with a tax professional before you file.