Schedule 1-A available for overtime, car loans, and seniors

The IRS published for tax year 2025 a new schedule that taxpayers will use to realize important tax benefits of the One, Big, Beautiful Bill, including no tax on tips, overtime, car loans, and seniors.

Schedule 1-A and its related instructions allow taxpayers to deduct amounts for tips, overtime, car loans, and the enhanced deduction for seniors. 

Part II of the new instructions explains how to determine the amount of qualified tips, how to claim the deduction of up to $25,000, and the phaseout for modified adjusted gross income (MAGI) greater than $150,000 ($300,000 for married taxpayers filing joint returns). Workers can claim this deduction, whether they claim the standard deduction or itemize. To claim the deduction, tips must be reported, and married taxpayers must file a joint return. The new instructions also provide examples of different scenarios for tipped workers, worksheets to help tipped workers calculate their tipped income, and information on lists and categories of occupations where workers customarily and regularly receive tips, as well as definitions of qualified tips. 

Part III of the new instructions explains how certain workers can claim a deduction for overtime compensation they received. Married taxpayers must file a joint return to claim this deduction. Workers can claim this deduction whether they claim the standard deduction or itemize. 

The new instructions describe how taxpayers can claim a deduction of up to $12,500 ($25,000 if married filing jointly) and explain how the deduction is reduced when MAGI exceeds $150,000 ($300,000 if married filing jointly).

The instructions define qualified overtime compensation as overtime compensation that is paid as required under section 7 of the Fair Labor Standards Act of 1938, and more than the amount of the regular rate of pay. The instructions provide illustrative examples and worksheets.

Part IV of the new instructions explains how taxpayers can claim a deduction for car loan interest. Taxpayers can deduct qualified passenger vehicle loan interest whether they claim the standard deduction or itemize. 

The instructions define the terms “qualified passenger vehicle loan interest,” “applicable passenger vehicle,” “final assembly in the United States,” and “personal use,” and provide an example.

Part V describes the enhanced deduction for seniors, which can be claimed whether they take the standard deduction or itemize; to claim the deduction, married couples must file jointly. 

To qualify for the enhanced deduction, the taxpayer (and/or the taxpayer’s spouse, if filing a joint return) must have been born before Jan. 2, 1961. The taxpayer must have a valid Social Security number; if married filing jointly, each spouse who is claiming the enhanced deduction for seniors must have a valid SSN.

The maximum enhanced deduction for seniors is $6,000 per person. For married filing jointly, if both spouses were born before Jan. 2, 1961, and both have a valid SSN, the enhanced deduction for seniors is $12,000. The $6,000-per-person amount is reduced if the MAGI exceeds $75,000 ($150,000 for married couples filing jointly).

The IRS encourages people to file their tax returns electronically and to choose direct deposit for faster, more secure refunds. Filing electronically reduces tax return errors because the tax software performs the calculations, flags common errors, and prompts taxpayers for missing information.

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