Schedule 1-A: Deductions for Tips, Overtime, Car Loan Interest, and Seniors

These deductions currently apply for tax years 2025 through 2028. This guide explains the 2025 form, including its year-specific reporting relief. Do not reuse that relief automatically for 2026.

Retain calculations and supporting documents. A form's maximum deduction is not evidence that you actually received that much qualifying income or paid that much interest.

Eligible workers may deduct up to $25,000 of qualified tips per return before the income phaseout. A married couple does not receive a separate $25,000 limit for each spouse.

Qualified tips generally are voluntary, customer-determined cash or cash-equivalent tips received directly or through an employee tip-sharing arrangement. Card and electronic-payment tips can qualify. Mandatory service charges and noncash gifts generally do not.

The work must fall within the IRS list of occupations that customarily and regularly received tips on or before December 31, 2024. Examples include wait staff, bartenders, certain personal-service workers, rideshare drivers and delivery workers. Check the actual duties and Treasury Tipped Occupation Code list, rather than assuming every tipped job qualifies.

Specified service trade or business restrictions normally apply, but the IRS provides transition relief relevant to 2025. Apply Notice 2025-69 guidance and the current occupation rules together. Being listed does not waive the remaining requirements.

Lines 4a through 4c address employee tips. Eligible W-2 box 7 amounts, employer tip reports and Form 4137 may support the calculation. Use the IRS worksheets for multiple employers or businesses. Do not add overlapping W-2 and Form 4137 totals twice.

Line 5 covers eligible self-employment tips. For 2025, qualifying tips must be included in the applicable Form 1099 totals and supported by records. Cash tips omitted from those statements are not automatically deductible merely because you report the business income.

The self-employed limit is net income from the relevant business after allocable deductions, including applicable deductions for part of self-employment tax, retirement-plan contributions and health insurance. It is not always Schedule C line 31 alone. Apply the limit separately to each business.

Lines 6 through 13 combine eligible amounts, apply the cap and calculate the phaseout. The reduction is $100 for each complete $1,000 of MAGI above $150,000, or $300,000 jointly. Line 11 rounds the quotient down.

Example: A single filer has $18,000 of otherwise qualifying tips and $160,500 MAGI. The $10,500 excess produces ten complete $1,000 increments. The reduction is $1,000, leaving a $17,000 deduction on line 13.

The deduction is for qualifying vehicle-loan interest, not principal repayments, the vehicle price or lease payments. The maximum is $10,000 per return before phaseout, not $10,000 per vehicle.

The loan generally must originate after December 31, 2024, be incurred by the taxpayer to purchase a qualifying vehicle for personal use, and be secured by a first lien on that vehicle.

The vehicle must:

An American brand name is not proof of U.S. assembly. Check the vehicle label or NHTSA VIN decoder, and retain the result.

The 2025 instructions generally test whether personal use was expected to exceed 50% when the purchase loan was incurred. A qualifying mixed-use vehicle needs coordination with business deductions. Interest already deducted on Schedule C, E or F cannot also be deducted on Schedule 1-A.

Refinancing an eligible loan can preserve eligibility for interest on the outstanding qualifying balance if the first-lien requirement remains satisfied. Extra cash borrowed is not automatically eligible. Interest attributable to rolled-in negative equity from a traded vehicle or separately financed ineligible items must be excluded.

Line 22 lists each VIN, qualifying interest deducted elsewhere and the remaining qualifying interest claimed here. Attach the required statement for more than two VINs. Use actual eligible interest records, not total monthly payments.

Apply the $10,000 cap on line 24. The deduction decreases by $200 for every $1,000 or fraction of $1,000 of MAGI above $100,000, or $200,000 jointly. Line 28 rounds up, unlike tips and overtime.

Example: A single filer has $3,000 eligible interest and $110,500 MAGI. Divide the $10,500 excess by $1,000 and round up to 11. The reduction is $2,200, leaving an $800 deduction on line 30.

For example, an eligible $1,680 overtime deduction plus an $800 vehicle-interest deduction, with no other Schedule 1-A deductions, totals $2,480 on line 38. That is a deduction from taxable income, not a $2,480 refund.

Review related calculations, including the QBI deduction on Form 8995, when applicable. Schedule 1-A can change taxable-income-based calculations without reducing AGI.

Most 2025 calendar-year individual returns were due April 15, 2026. A valid extension generally allows filing until October 15, 2026, but did not extend payment time. Check IRS deadline exceptions.

If already filed, review whether Form 1040-X is appropriate. The IRS's May 2026 tip-occupation update specifically notes that final occupation rules may support a new or changed deduction on an amended 2025 return.

This guide provides general educational information about the 2025 Schedule 1-A, not personalized tax, legal or accounting advice. Eligibility depends on income, employment, loan terms and other facts. Use the correct year's IRS materials and consult a qualified tax professional before filing.