Schedule 1-A Deductions Explained: Tips, Overtime, Car Loan, and Seniors
A guide to the four Schedule 1-A deduction categories under the One Big Beautiful Bill Act (OBBBA) for tax year 2025.
Schedule 1-A (Additional Deductions) under the One Big Beautiful Bill Act (OBBBA) introduces four new deduction categories for tax year 2025. Here's what tax professionals need to know.
The Four Categories
1. Tips (Part II)
Qualifying tip income can be deducted up to $25,000. Phaseout begins at $150,000 MAGI (Single/HOH/MFS) or $300,000 (MFJ).
2. Overtime (Part III)
Overtime pay can be deducted up to $12,500 (Single/HOH/MFS) or $25,000 (MFJ). The IRS provides multiple calculation methods (A through F) — choose the one that works best for your client.
3. Car Loan Interest (Part IV)
Interest on loans for US-assembled vehicles can be deducted up to $10,000. Phaseout begins at $100,000 MAGI (Single) or $200,000 (MFJ). VIN verification is required.
4. Seniors (Part V)
Eligible individuals (65+ with valid SSN) can claim $6,000 per person. Phaseout begins at $75,000 (Single) or $150,000 (MFJ).
Key Considerations
- Schedule 1-A is a draft form — for planning only, not for filing until finalized.
- All calculations should be verified against IRS guidance (Notice 2025-69).
- Use our Schedule 1A Calculator for a full audit trail and line-by-line trace.
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