IRS posts Schedule 1‑A to claim new deductions for tips, overtime, car loans, seniors
The IRS published the two-page Schedule 1‑A and instructions for 2025 returns, and taxpayers must file it to get four new below‑the‑line breaks created by the One Big Beautiful Bill Act. Tens of millions of returns are already claiming the benefits — but income limits, filing-status rules and documentation requirements mean some filers will lose out if they file incorrectly.
Jul 18, 2026, 5:25 AM EDT
Why it matters:
- The new Schedule 1‑A is the gatekeeper for four tax breaks on 2025 returns; you won’t get the deductions unless you file the form with your 2025 federal return.
Driving the news:
- The IRS posted Schedule 1‑A and updated instructions on March 2, 2026, explaining how to claim the new deductions. - The form covers four below‑the‑line deductions: qualified tips, certain overtime pay, qualified passenger vehicle loan interest, and an enhanced senior deduction.
By the numbers:
- Tip deduction: up to $25,000, with the phaseout starting at modified AGI over $150,000 ($300,000 for joint filers). - Overtime deduction: up to $12,500 for singles and $25,000 for joint filers; phaseouts use the same MAGI thresholds. - Senior enhanced deduction: $6,000 per person ($12,000 if both spouses qualify), reduced above MAGI $75,000 ($150,000 joint). - The Treasury reported that nearly 45% of 63.5 million returns processed through March 8 claimed at least one of the new breaks.
The catch:
- Many of the deductions require married taxpayers to file joint returns to claim the full amounts or to qualify at all. - Tips must be reported and calculated using the worksheets and examples in the instructions; overstating qualifying tips or overtime is a common pitfall. - The car‑loan interest break applies only to loans for new passenger vehicles purchased in 2025 with final assembly in the U.S.; the form asks for the vehicle VIN. - These are below‑the‑line deductions — they reduce taxable income but do not lower adjusted gross income, so they won’t help you qualify for AGI‑based credits.
What to watch:
- Expect tax pros and software vendors to publish calculation tools and worksheets; use IRS instructions and e‑filing to reduce errors. - Watch for IRS guidance or audit notices clarifying acceptable documentation for overtime and tip calculations.
The bottom line:
- File Schedule 1‑A with your 2025 return and follow the IRS worksheets precisely if you want to capture these new deductions without triggering errors or denials.