Deductions · calculator
Schedule 1-A: the four new deductions on one form
One form, four deductions, three different phase-out rules: what goes on each part and how the total reaches Form 1040.
Schedule 1-A: the four new deductions together
Schedule 1-A line 38
$7,500
About $1,650 of federal income tax saved
- No tax on tips$0
- No tax on overtime$6,000
- Car loan interest$1,500
- Enhanced deduction for seniors$0
All four reduce taxable income, not AGI, and can be claimed with the standard deduction or itemizing. They run from 2025 through 2028.
Schedule 1-A, Additional Deductions, is the form the IRS created for the 2025 return to carry the four temporary deductions of Public Law 119-21, and it keeps that role for 2026 through 2028. Part I computes modified AGI, Form 1040 line 11b plus excluded foreign or Puerto Rico income. Part II deducts qualified tips up to $25,000; Part III, the qualified overtime premium up to $12,500 or $25,000 joint; Part IV, interest on a new US-assembled vehicle up to $10,000; Part V, $6,000 per person aged 65 or older. Each part has its own phase-out: $100 per full $1,000 above $150,000 for tips and overtime, $200 per $1,000 or fraction above $100,000 for car interest, 6% of the excess above $75,000 for seniors (joint thresholds are twice as high). Line 38 adds the four results and goes to Form 1040 line 13b, below AGI, whether you itemize or take the standard deduction.
Checked by Radif Partners · Editorial policy · How we calculate
Part by part
| Part | Deduction | Cap | Phase-out starts (single / joint) | Rule |
|---|---|---|---|---|
| II | Qualified tips | $25,000 | $150,000 / $300,000 | $100 per full $1,000 |
| III | Qualified overtime premium | $12,500 / $25,000 | $150,000 / $300,000 | $100 per full $1,000 |
| IV | Car loan interest | $10,000 | $100,000 / $200,000 | $200 per $1,000 or part |
| V | Seniors 65 and older | $6,000 each | $75,000 / $150,000 | 6% of the excess |
The single thresholds also apply to heads of household. None of these amounts is indexed for inflation: the statute fixes them for the four years, which is why the 2026 figures equal the 2025 ones.
Modified AGI, computed once
Part I is shared: line 1 copies Form 1040 line 11b, lines 2a to 2d add income excluded from Puerto Rico or under the foreign earned income exclusion (Form 2555) and the possessions exclusion (Form 4563), and line 3 is the modified AGI that every part then uses. An American working abroad who excludes $132,900 of salary under the foreign earned income exclusion adds it back here, which can push the household past a threshold.
Records to keep
For tips, the W-2 boxes, Forms 4070 reported to the employer and Form 4137 for unreported tips, or a daily log for the self-employed. For overtime, the pay stubs showing hours and rates. For the car, the purchase contract, the lender's interest statement and the VIN. For the senior deduction, nothing beyond your Social Security number. The IRS can ask for these when it reviews a return.
Why the four rarely add up to their caps
The caps are high compared with what most claimants have: tipped workers in the IRS estimate number about six million, and many earn well under $25,000 in tips. The phase-outs then trim higher earners, and the saving is always the deduction times the marginal rate, so a household in the 12% bracket saves twelve cents per deducted dollar. For the full picture with credits and withholding, use the refund estimator.
Sources: IRS Schedule 1-A (Form 1040) 2025, Additional Deductions: tips, overtime, car loan interest, seniors; IRS IR-2025-114 and Notice 2025-69: tips and overtime for tax year 2025, with worked examples; IR-2026-02 on the new Schedule 1-A, read on October 11, 2026.