The IRS Just Released Schedule 1-A. Here's What Your Clients Can Claim Right Now.

The IRS just released Schedule 1-A - the actual form your clients need to claim the OBBBA's four signature deductions. Tips, overtime, car loan interest, and the enhanced senior deduction all land on this one-page form. If you've got W-2 clients or self-employed folks who might qualify, here's what you need to know right now.

What Schedule 1-A Does

It's a single form that calculates all four deductions from the One Big Beautiful Bill Act. Your clients add up the deductions that apply, dump the total on line 13b of Form 1040, and call it a day.

The form itself matches the draft version from last year, but the updated Form 1040 instructions spell out exactly how each deduction works. That's where the real details live.

The Tips Deduction (and the SSTB Problem)

Your clients can deduct qualified tips - but not if they work for an SSTB (Specified Service Trade or Business). Think consultants, lawyers, financial advisors. If your client slings coffee at a law firm, their tips don't qualify. If they sling coffee at a regular café, they do.

The catch: until the IRS issues final regulations, they're using transition relief. If your client worked in an occupation that "customarily and regularly" received tips before December 31, 2024, they're in. That covers waiters, bartenders, hairdressers, valets - the usual suspects.

Self-employed? Same rules. If you're a self-employed consultant getting "tips," tough luck. If you're a self-employed wedding photographer getting gratuities from clients, you're probably fine.

The Overtime Deduction (FLSA Premium Only)

Here's where it gets specific: your client can only deduct the FLSA overtime premium, not the full overtime wage. If they make $20/hour regular and $30/hour for overtime, they deduct $10/hour (the premium), not the full $30.

If their W-2 doesn't break out the premium separately, they can request it from their employer or calculate it themselves using the methods in the Form 1040 instructions. The IRS gives examples.

Public sector employees (firefighters, cops) covered by different Section 7 overtime rules can use the same methods, as long as the result is reasonable. Comp time instead of cash? That counts too.

The Car Loan Interest Deduction (New Vehicles Only)

This one's narrow. Your client's car must be an "applicable passenger vehicle" (APV), which means:

• Original use starts with them - no used cars

• Manufactured for public roads - no golf carts or rail vehicles

• At least two wheels - motorcycles count

• Under 14,000 pounds GVW - most cars, minivans, SUVs, pickups

• Final assembly in the U.S. - check the VIN or manufacturer label

If your client bought a used Honda, financed a Tesla assembled in Shanghai, or drives a semi, they're out. If they bought a new Ford F-150 assembled in Dearborn, they're in.

The Enhanced Senior Deduction (Age 65 Rule)

If your client was born before January 2, 1961, and is still alive, they qualify for the enhanced standard deduction. Simple.

The twist: if they died in 2025 before turning 65, they don't qualify - unless they died on or after the day before their 65th birthday. The IRS example: born February 14, 1960, died February 13, 2025? Qualifies. Died February 12, 2025? Doesn't qualify.

Why it matters: if you're filing for a deceased taxpayer born in early 1960, the exact date of death determines whether they get the extra deduction.

All Four Deductions Expire After 2028

This isn't permanent tax law. All four deductions sunset after the 2028 tax year unless Congress extends them. That means three more filing seasons (2025, 2026, 2027 returns) before they're gone.

If your clients qualify now, they qualify for the next three years. If they don't qualify now (wrong industry, used car, too young), they probably won't qualify before the sunset.

The Modified AGI Phaseout

Schedule 1-A includes a section for calculating modified AGI, which determines phaseouts for all four deductions. High earners lose some or all of the benefit. The exact thresholds are in the instructions, but if your client makes enough to hit AMT, they're probably hitting phaseout territory too.

What This Means for CPAs

If you've got clients in tipped industries, public sector overtime workers, or anyone who bought a new American-made car in the last year, Schedule 1-A matters this filing season. The form's out, the instructions are live, and your clients who qualify can claim these deductions right now.

Just make sure you're checking SSTB status for tips, calculating the overtime premium correctly, and verifying final assembly location for car loans. The IRS spelled it out - now it's on us to get it right.