IRS Draft Tax Form Schedule 1-A Offers Insights Into New Deductions After OBBBA
The IRS has released a draft of Schedule 1-A Additional Deductions (Form 1040) for tax year 2025, offering insights on how taxpayers and professional tax preparers will claim some of the new deductions introduced by the One Big Beautiful Bill Act. The IRS routinely publishes draft tax forms in advance to seek comment from tax professionals and help taxpayers plan for filing.
Schedule 1-A is an additional form attached to Form 1040, 1040-SR, or 1040-NR. It specifically addresses new deductions created by recent legislation. The form is currently in draft status and not for filing, but it provides a preview of what taxpayers can expect.
Portion of IRS Draft Schedule 1-A (Form 1040) Additional Deductions
Schedule 1-A is divided into five main parts:
- Part I: Modified Adjusted Gross Income (MAGI) Calculation
- Part II: No Tax on Tips
- Part III: No Tax on Overtime
- Part IV: No Tax on Car Loan Interest
- Part V: Enhanced Deduction for Seniors
Part I Modified Adjusted Gross Income (MAGI) Calculation Lines 1–3
The form begins by calculating the taxpayer's MAGI, which is used to determine eligibility for several new deductions. This includes adjustments for income excluded from Puerto Rico (Line 2a), foreign earned income (Line 2b), and other specific sources.
Part II No Tax on Tips Lines 4–13
Taxpayers who receive qualified tips as employees or in the course of business may be eligible for a deduction of up to $25,000 ($25,000 if married filing jointly). The deduction is subject to income limits and requires valid Social Security numbers.
Part III No Tax on Overtime Lines 14a–21
If you received qualified overtime compensation, you may deduct up to $12,500 ($25,000 if married filing jointly). This applies to both W-2 employees and those receiving 1099 income, with similar income limits and joint filing requirements.
Part IV No Tax on Car Loan Interest Lines 22–30
A new deduction allows taxpayers to claim up to $10,000 in qualified passenger vehicle loan interest, subject to MAGI limits. The form requires vehicle identification numbers (VINs) and details about how the interest was reported.
Part V Enhanced Deduction for Seniors Lines 31–37
Taxpayers born before January 2, 1961, can claim an enhanced deduction of up to $6,000, reduced by a percentage of income above $75,000 ($150,000 if married filing jointly). Both spouses may qualify if filing jointly.
Part VI Total Additional Deductions Line 38
The form totals all additional deductions which are then reported on Form 1040 or 1040-SR, line 13b, or on Form 1040-NR, line 13c.
Keep in mind, the form is in draft mode and the IRS reminds people not to file it. You can download it here: Https://www.irs.gov/pub/irs-dft/f1040s1a--dft.pdf
The IRS typically finalizes new tax forms between late December and mid-January each year, and the final version will then become available on the IRS website.
