IRS Releases Schedule 1-A: How to Claim the New Tips, Overtime, and Senior Deductions

The IRS just published the official Schedule 1-A and updated instructions for claiming the One Big Beautiful Bill deductions. If you have clients filing in the next two weeks, this is what they need.

What's in Schedule 1-A

Four new deductions, all with phaseouts starting at $150K MAGI ($300K joint):

Tips: Up to $25,000 of tip income excluded from gross income. Applies to cash tips, credit card tips, and tip-sharing arrangements. Does NOT cover service charges or automatic gratuities. IRS FAQ clarifies you can claim this whether you itemize or take the standard deduction. Married filers must file jointly.

Overtime: Up to $12,500 ($25,000 joint) of overtime compensation deductible. Qualifies if paid under Fair Labor Standards Act section 7 and exceeds regular rate of pay.

Car loan interest: Qualified passenger vehicle loan interest is now deductible. Vehicle must have final assembly in the United States and be used primarily for personal use.

Seniors: $6,000 per person enhanced deduction if born before Jan 2, 1961. Must have valid SSN. Married filing jointly can claim $12,000 if both qualify. Phases out above $75K MAGI ($150K joint).

What This Means for CPAs

The form dropped late in filing season, which means clients who already filed may want to amend. That's extra work for practitioners who thought tax season was winding down.

The phaseout calculations add complexity. The instructions include worksheets, but you're walking clients through new math most haven't seen before.

IRS is pushing e-filing and direct deposit for these returns, which should speed refunds. But the software providers need to update for Schedule 1-A, and not all of them move fast.

The Timing Problem

Over 830,000 taxpayers are already dealing with refund delays this season. Adding last-minute deduction complexity to that backlog is rough timing.

If you've got tipped workers, overtime earners, or clients over 65, flag this now. April 15 is two weeks out, and these deductions could move the needle on refunds.

Source: Accounting Today, April 2026