The IRS has introduced a new tax form called IRS Schedule 1-A (Form 1040) for the 2026 filing season.
This form allows eligible taxpayers to claim new OBBB deductions, including tax free tips 2026, no tax on overtime pay, car loan interest, and an enhanced deduction for seniors.
Schedule 1-A applies to tax years 2026 to 2028 and will first be used when filing 2026 tax returns in 2026.
What Is IRS Schedule 1-A?
Schedule 1-A is a new IRS form created after the passage of the One Big Beautiful Bill Act (OBBB).
Calculate Your 2026 COLA Increase →It is used to calculate and claim four new federal tax deductions:
- No tax on tips
- No tax on overtime pay
- No tax on car loan interest
- Enhanced deduction for seniors (age 65+)
These deductions reduce your taxable income, not your adjusted gross income (AGI). That means they lower the amount of income you are taxed on, but do not affect your eligibility for other tax credits that depend on AGI.
Official form PDF:
https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf
Who Should Use Schedule 1-A?
You should use IRS Schedule 1-A if you qualify for at least one of the following:
- You earned tips as part of your job
- You earned overtime pay
- You paid interest on a qualifying U.S. car loan
- You or your spouse is age 65 or older
You can use Schedule 1-A whether you take the standard deduction or itemize.
What Deductions Are on Schedule 1-A?
1. No Tax on Tips
This allows eligible workers to deduct up to $25,000 in qualified tip income.
- Tips must be voluntary and reported.
- Mandatory service charges do not qualify.
- Phase-out starts at $150,000 MAGI (single) or $300,000 (joint).
This is what people mean by tax free tips 2026.
2. No Tax on Overtime Pay
Workers can deduct the premium portion of overtime pay (the “half” in time-and-a-half).
- Maximum deduction:
- $12,500 (single)
- $25,000 (married filing jointly)
- Phase-out: same as the tip deduction.
This is what the IRS refers to as no tax on overtime pay.
3. Car Loan Interest Deduction
You may deduct up to $10,000 in interest paid on a qualifying car loan if:
- The vehicle was bought new
- Final assembly was in the U.S.
- The loan started in 2026
- The car is for personal use
Leased vehicles and business vehicles do not qualify.
4. Enhanced Deduction for Seniors
Taxpayers age 65 or older can claim:
- $6,000 (single)
- $12,000 (married filing jointly, if both qualify)
Phase-out starts at $75,000 MAGI (single) or $150,000 (joint).
How to Fill Out Schedule 1-A
Schedule 1-A has six parts, but you only complete the sections that apply to you.
Part I – Calculate Modified Adjusted Gross Income (MAGI)
Part II – No Tax on Tips
Part III – No Tax on Overtime
Part IV – Car Loan Interest Deduction
Part V – Enhanced Deduction for Seniors
Part VI – Total Additional Deductions
The total from Part VI is transferred to your Form 1040 and reduces your taxable income.
When and How to File Schedule 1-A
- Attach Schedule 1-A to your Form 1040 or 1040-SR.
- File it when submitting your 2026 tax return in 2026.
- Filing deadline: April 15, 2026 (unless you request an extension).
Schedule 1-A vs Schedule 1 vs Schedule A
| Form | What It Does |
|---|---|
| Schedule 1-A | Claims OBBB deductions |
| Schedule 1 | Reports extra income and adjustments |
| Schedule A | Itemized deductions |
Schedule 1-A is a brand-new form and does not replace Schedule 1 or Schedule A.
Important Things to Remember
- These deductions are temporary (2026–2028 only).
- Income limits apply and may reduce or eliminate the deduction.
- Payroll taxes still apply to tips and overtime income.
- State tax rules may differ from federal rules.
- Keep records like pay stubs, tip logs, loan statements, and proof of age.
IRS Schedule 1-A is the key form for claiming the new OBBB deductions introduced under the One Big Beautiful Bill Act.
If you earn tips, work overtime, bought a qualifying car, or are over 65, this form could significantly reduce your taxable income and increase your refund in 2026.
Filing it correctly could be the difference between an average refund and a much bigger one.
