New for the 2025 return and easy to miss, because the deductions it carries were announced long before the schedule that holds them. Tips and overtime are claimed here rather than on Schedule C, and are available whether you itemise or take the standard deduction.

Who files it, and who does not

Schedule 1-A was created for the 2025 return. It carries four deductions enacted on July 4, 2025, in Public Law 119-21: tips, overtime, car loan interest, and an enhanced deduction for seniors. Each runs for tax years 2025 through 2028. This page covers tips, overtime and the deduction for seniors.

Two things close it before any arithmetic starts:

  • A separate return. For tips, overtime and seniors the form says the same thing each time: "If married, you must file jointly to claim this deduction."
  • No valid Social Security number. The number must be valid for employment and issued before the due date of the return, including extensions. For tips and overtime it is the spouse who received the pay whose number counts; for seniors, each spouse who claims.

A third can close the tip deduction: tips received in a specified service trade or business, the same fields that limit the qualified business income deduction, are not qualified tips. For now the IRS applies transition relief. Until final regulations are published, it treats anyone in an occupation that customarily and regularly received tips as working outside one (Notice 2025-69). Is my work an SSTB? goes through the list by occupation.

Where it sits on the return

The instructions describe the schedule as the place "to report additional deductions that can't be entered directly on Form 1040." Line 38 carries the total to Form 1040, line 13b, below adjusted gross income. That position decides what the deductions do:

  • They lower taxable income, whether you itemise or take the standard deduction.
  • They do not lower adjusted gross income, so anything else on the return that depends on AGI is unchanged.
  • They do not touch self-employment tax, which Schedule SE figures from your net earnings.

For a self-employed reader the practical point is the one Publication 334 makes: the tip and overtime deductions are "claimed on Schedule 1-A (Form 1040), not on your Schedule C (Form 1040)." Your Schedule C profit does not move.

The parts and lines

Part Lines What it does
I 1–3 Modified AGI: Form 1040, line 11b, plus any excluded income from Puerto Rico or Forms 2555 and 4563
II 4–13 Tips. Line 4 is tips as an employee, line 5 tips in your own business, line 7 applies the $25,000 cap
III 14–21 Overtime. Line 14b is overtime reported on a 1099; line 15 applies the cap
V 31–37 The enhanced deduction for seniors
VI 38 The total, carried to Form 1040, line 13b

Part IV, lines 22 to 30, is not covered here.

Tips in your own business: line 5

A tip qualifies only if the customer chose it. The instructions exclude "service charges, automatic gratuities, or any other mandatory amounts automatically added to a customer's bill," unless the customer is expressly allowed to change or remove them without consequence. A card reader that offers 15%, 18%, 20%, other and no tip produces a qualified tip whichever the customer presses. An 18% charge added to every large party does not. The work must also be in an occupation that customarily and regularly received tips on or before December 31, 2024; the IRS lists them at IRS.gov/TippedOccupations.

Then comes the limit that decides most self-employed returns. Tips count only up to the net income of the business that earned them, and net income is not quite your Schedule C profit. The instructions spell it out for a sole proprietor:

"The net income limitation will be the net profit shown on the Schedule C for the business, less the amount from Schedule 1, line 15."

Schedule 1, line 15 is the deductible part of self-employment tax. On a net profit of $9,800 that is about $692, so the net income limitation is $9,108, and tips of $14,200 from that business count only up to $9,108. The instructions say the rest "can't be taken into account", and nothing on the schedule carries it to another year. If the business shows a loss, none of its tips go on line 5. Your tips are deductible works through a full year for a booth renter.

For 2025 no form separates your tips from the rest of your income. Notice 2025-69 lets a non-employee use "earnings statements or other documentation such as receipts, point-of-sale system reports, daily tip logs, third party settlement organization records" to show the amount. From 2026 the forms report tips on their own: see the new boxes on Form 1099-NEC.

Overtime: the premium only

Qualified overtime is overtime paid "as required under section 7 of the Fair Labor Standards Act of 1938 (FLSA) that is more than the amount of your regular rate of pay." In practice that is "the 'half' portion of 'time-and-a-half' compensation." If a statement shows your total overtime pay at time and a half, the instructions let you divide it by three.

What does not count is listed just as plainly: pay above time and a half, extra pay for weekends and holidays when you did not work more than 40 hours that week, and overtime paid under state law to someone the federal law does not cover. The cap is $12,500, or $25,000 on a joint return, and on a joint return it is a combined limit, "not a per spouse limit."

Seniors: $6,000 each

You qualify if you are 65 by the last day of the tax year and have a valid Social Security number. The 2025 instructions put the age test as born before January 2, 1961, and they count a person as reaching 65 "on the day before the person's 65th birthday." The deduction is up to $6,000 for each eligible person, or $12,000 when both spouses on a joint return qualify.

How each one phases out

Deduction Cap Starts to shrink above modified AGI of Reduction
Tips $25,000 per return $150,000 ($300,000 joint) $100 for each full $1,000 over
Overtime $12,500 ($25,000 joint) $150,000 ($300,000 joint) $100 for each full $1,000 over
Seniors $6,000 per eligible person $75,000 ($150,000 joint) 6% of the excess

A single filer with modified AGI of $160,000 and $10,000 of qualified tips is $10,000 over, so the deduction falls by $1,000 to $9,000. A single filer aged 65 with modified AGI of $85,000 loses 6% of $10,000, or $600, and deducts $5,400.

Everything on this site that lands here

Each article declares the sheet its number ends up on, so this list is the writing itself rather than a summary of it.

ReadWhere it lands
Your tips are deductible. For 2025, no form will prove it. qualified tips, capped by net profit

Common questions

Do I have to itemise to use Schedule 1-A?
No. The instructions: "You can claim these deductions whether you claim the standard deduction or itemize deductions on Schedule A." The total on line 38 goes to Form 1040, line 13b.
Does the tip deduction lower my self-employment tax?
No. The deduction is taken on Form 1040 after adjusted gross income is figured, and self-employment tax is figured separately on Schedule SE. The instructions say tips from self-employment "must be included in your gross income and are subject to income tax and social security and Medicare tax." The deduction reduces the first of those and leaves the others where they were.
I am married and file a separate return. Can I use it?
Not for tips, overtime or the deduction for seniors. For each of them the form says: "If married, you must file jointly to claim this deduction." There is no income level at which a separate return qualifies.
I am an independent contractor. Can I deduct overtime?
Only overtime the Fair Labor Standards Act required. The instructions: qualified overtime "must be paid to a covered, nonexempt employee under the FLSA." A higher rate you agree with a client for evening or weekend work is not that. Line 14b is for FLSA overtime that was reported on a Form 1099-NEC or 1099-MISC, and the instructions say to enter only that portion, never the box total.
Is the senior deduction the same as the extra standard deduction at 65?
No. The IRS fact sheet: "This new deduction is in addition to the current additional standard deduction for seniors under existing law." It is $6,000 for each eligible person, and it is available whether you itemise or not.

The official page

Everything here is written from the IRS's own material, and the place to check it is Schedule 1-A on irs.gov. Figures and rules change; the source is what settles them.

This is educational material, not tax advice. Your own situation may turn on facts this page does not know about.