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New IRS form Schedule 1‑A required to claim 2025 tax breaks
Latest News About Form Schedule 1-A
Schedule 1-A is a new, two-page, federal income tax form that must be filled out accurately and filed with 2025 tax returns that to claim new tax deductions on qualifying tip income, overtime, new car loan interest and a new deduction for many people 65 and older.
What is Schedule 1‑A and who must file it?
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Schedule 1-A is the new, two-page, federal income tax form that must be filled out accurately and filed with 2025 federal income tax returns that claim:
- A new deduction for qualified tip income.
- A new deduction for qualified overtime pay.
- A new deduction for new car loan interest.
- The enhanced deduction for qualified seniors who are age 65 and older.
All four deductions are available to eligible taxpayers whether they itemize deductions, such as claiming mortgage interest, or claim the standard deduction.
A large proportion of taxpayers claim the standard deduction, so it's important to know that you can still use Schedule 1-A to get a tax break on new car loans, overtime pay, tip income, and a bonus deduction for adults age 65 and older.
How the tips and overtime deductions work?
Even though the brand new deductions "feel simple," filling out a Schedule 1-A will force you to do much more than simply copy some numbers off a W-2 when claiming for a tax break on tips or one for overtime, said Tom O’Saben, enrolled agent and director of tax content and government relations for the National Association of Tax Professionals.
Taxpayers need to remember that the IRS specifically states that your tax deduction for overtime, for example, only can be claimed for the "half" portion of "time-and-a-half" pay. And that exact figure might not be on your W-2 for 2025, depending on where you work.
If someone is not careful, Saben said, they risk overstating the amount of overtime that qualifies for the deduction if they claim all OT wages or all the money, they received working more than 40 hours in a given work week.
The tax deduction generally applies only to overtime that meets the Fair Labor Standards Act definition, which boils down to the hours worked that exceed 40 hours in a workweek that are paid at time-and-a-half.
The maximum annual deduction for overtime pay is $12,500 for singles and $25,000 for a married couple filing jointly. Married couples who file separately cannot claim the deduction for overtime pay.
Income limits, detailed rules and other restrictions apply to all four tax breaks, which currently apply to 2025, 2026, 2027 and 2028 tax years.
Rules for the new car loan interest deduction:
To claim the new deduction on new car loans on the 2025 tax return, for example, Schedule 1-A includes a spot where you'll need to list the vehicle identification number associated with the car loan being claimed. The auto loan must be taken out in 2025 to buy a new car with its final assembly in the United States. The tax break will not apply to car loans taken out to buy a used car — or new cars or new trucks with final assembly outside of the United States.
How seniors 65+ claim the enhanced deduction
Adults age 65 and older are looking at a section called "Part V" for the "enhanced deduction for seniors." You don't need to be collecting Social Security benefits to claim the tax break, but you do need to be born before Jan. 2, 1961, in order to claim the new tax deduction on 2025 returns.
If they fill out a Schedule 1-A, those who are age 65 and older may claim an additional deduction of $6,000 beginning on 2025 returns. But higher income seniors receive a smaller tax break or no tax break because the deduction starts phasing out for those with a modified adjusted gross income of $75,000 for singles and $150,000 for joint filers.
When it comes to phaseouts, O'Saben noted, that doesn't involve simple math. It's possible that you'd lose out on the deduction much faster than you'd imagine.
The four special tax deductions created in the One Big Beautiful Bill Act will be treated as what's called a "below-the-line deduction."
What it means: You'll be able to reduce your taxable income. But you won't be reducing your adjusted gross income when you claim these special deductions, O'Saben said.
A below-the-line deduction — which is how car loan interest, tips, overtime, and the enhanced break for seniors will be treated — is subtracted after your adjusted gross income has been determined. It will not reduce your AGI and not help you tap into some credits or other tax breaks.
For more information about these tax benefits, see One, Big, Beautiful Bill Provisions on IRS.gov.
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