IRS Schedule 1-A, titled Additional Deductions, is a new attachment to Form 1040 that first applies to the 2025 tax year, the return you file in early 2026. You use it to claim four deductions created by the One, Big, Beautiful Bill Act: a deduction for tip income, one for overtime pay, one for interest on a loan for a U.S.-assembled vehicle, and a bonus deduction for taxpayers age 65 and older.1Internal Revenue Service. Schedule 1-A, Additional Deductions: What to Know About the New Form Attach it to your Form 1040, 1040-SR, or 1040-NR whenever you qualify for one or more of these deductions.
These are deductions, not credits. They reduce your taxable income before the tax is calculated, so the value depends on your marginal bracket.
The Four Deductions on the Form
Tip Income
The tip deduction is for employees who receive cash tips in occupations where tipping is customary, such as restaurant servers, bartenders, hotel staff, and hairdressers. Tips must have been reported to your employer and appear on your W-2. Self-employed people reporting tip-like income on Schedule C do not use this line; the deduction is built around traditional employer-employee tipping.
The amount is capped, and it phases out as adjusted gross income rises. The deduction reduces federal income tax only and does not lower Social Security or Medicare tax. It applies to tax years 2025 through 2028.
Overtime Pay
Eligible hourly workers can deduct the overtime portion of their pay, meaning wages earned for hours worked beyond 40 in a workweek. Salaried employees who are exempt from the Fair Labor Standards Act’s overtime rules do not qualify, because their extra hours are not separately paid as overtime. The overtime amount needs to be identifiable on your W-2 or pay records. Income limits and a dollar cap apply, and the deduction runs through the same 2025–2028 window as the tip deduction.
Auto Loan Interest
You can deduct interest paid during the year on a loan used to buy a vehicle assembled in the United States. Final assembly location controls, not where the manufacturer is headquartered. Manufacturers and the Department of Transportation publish assembly data you can check before you file. The deduction covers interest only, not the purchase price, and the deductible amount may be limited based on the loan principal. Income limits also apply. Leases generally do not qualify because lease payments are not structured as loan interest. Your lender’s year-end statement is the record you need.
Senior Bonus
Taxpayers who are 65 or older by the end of the tax year may claim a flat additional deduction, separate from the higher standard deduction seniors already receive. You do not need to itemize. The deduction phases out at higher incomes, so it is most valuable to retirees with modest incomes. If you turned 65 at any point during the year, you qualify for the full amount for that year.
How to Complete Schedule 1-A
Gather your records first. For tips and overtime, your W-2 is the primary document and should show the reported amounts. For auto loan interest, pull your lender’s year-end interest statement and confirm the vehicle’s U.S. assembly. For the senior bonus, you only need to confirm your age and check the income phase-out.
The form walks through each deduction in sequence. Enter the qualifying amount on each line that applies and leave the others blank. The form totals your entries, and that total transfers to the designated line on your Form 1040, reducing taxable income before tax is computed.
A few things trip people up:
- Do not remove tips or overtime from your wage income. You still report the full W-2 wages on Form 1040 and then take the offsetting deduction on Schedule 1-A. Deducting twice invites a notice.
- Check the vehicle’s assembly location before claiming auto loan interest. A U.S.-headquartered brand is not the same thing as a U.S.-assembled vehicle.
- Run the phase-outs before entering figures. Each deduction has its own AGI threshold, and going over may cut the deduction or eliminate it. Catching this before you file avoids an amended return.
Filing the Form With Your Return
Schedule 1-A attaches to Form 1040 like any other supplemental schedule.1Internal Revenue Service. Schedule 1-A, Additional Deductions: What to Know About the New Form E-filing through IRS Free File, commercial software, or a paid preparer bundles it into your electronic return automatically. Most 2025-season software has been updated to include the form and will prompt you when it detects potentially qualifying income on your W-2.
If you file on paper, place Schedule 1-A behind Form 1040 in attachment-sequence-number order, with any other schedules you are filing.2Internal Revenue Service. IRS Tax Tip — How to Prepare Your Tax Return for Mailing The sequence number is printed in the upper right corner of each schedule. Confirm that the total from Schedule 1-A lands on the correct line of your Form 1040; a mismatch generates an IRS notice.
Because Schedule 1-A is new, first-season errors will be more common than usual. Keep copies of everything supporting your deductions: W-2s showing tip and overtime breakdowns, the lender’s interest statement, and documentation of your vehicle’s assembly location. If the IRS questions a deduction, those records are the difference between a quick reply and a drawn-out correspondence audit.
Schedule 1-A Is Not Schedule 1
The names look alike, and that causes confusion. Schedule 1 (Form 1040), “Additional Income and Adjustments to Income,” has existed since the 2018 redesign of Form 1040 and is where you report income beyond basic wages (business profits, rental income, unemployment, gambling winnings, canceled debt) and claim longstanding adjustments such as student loan interest, educator expenses, HSA contributions, and the deductible portion of self-employment tax.3Internal Revenue Service. 2025 Schedule 1 (Form 1040)
Schedule 1-A handles only the four new deductions from the One, Big, Beautiful Bill Act.1Internal Revenue Service. Schedule 1-A, Additional Deductions: What to Know About the New Form Freelance income, rental income, or alimony received under a pre-2019 agreement belongs on Schedule 1, not on Schedule 1-A. Plenty of filers will need both: Schedule 1 for additional income and traditional adjustments, and Schedule 1-A for the new deductions.