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Schedule 1-A: Additional Deductions (New for 2025)

Schedule 1-A is a new schedule for the 2025 tax year that provides above-the-line deductions for specific types of income and expenses. These deductions reduce AGI, meaning taxpayers benefit even when taking the standard deduction.

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Overview

Schedule 1-A deductions flow to Form 1040, Line 12c, which is added to the standard deduction on Line 12a to produce Line 14 (Total Deductions).
These are NOT itemized deductions. They are additional above-the-line deductions available to ALL filers regardless of whether they itemize.

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The Four Deduction Categories

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1. Tip Income Deduction

ParameterValue
What qualifiesCash and credit card tips reported as income
Maximum deduction100% of reported tip income
MAGI phaseout start (Single)$75,000
MAGI phaseout end (Single)$100,000
Where on W-2Tips are included in Box 1; Box 7 shows Social Security tips; Box 8 shows allocated tips
Schedule 1-A lineLine 1
Who benefits: Restaurant workers, bartenders, hotel staff, valets, hairdressers — anyone who receives tips as part of their compensation. How it works: If you earned tips that were included in your W-2 Box 1 wages, you can deduct them on Schedule 1-A. This effectively makes tip income tax-free (up to the phaseout threshold). Intake question: “Did you receive tips at work in 2025?“

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2. Overtime Pay Deduction

ParameterValue
What qualifiesOvertime pay (hours worked beyond 40/week at 1.5x rate)
Maximum deduction100% of overtime pay received
MAGI phaseout start (Single)$75,000
MAGI phaseout end (Single)$100,000
Where on W-2Included in Box 1; employer may detail in Box 14
Schedule 1-A lineLine 2
Who benefits: Hourly workers who regularly work overtime — factory workers, nurses, retail workers during holidays, etc. How it works: If your employer paid you overtime wages (typically noted in your pay stubs or Box 14), you can deduct that amount. This effectively eliminates federal income tax on overtime pay. Intake question: “Did you work overtime (paid at 1.5x your regular rate) in 2025? If yes, what was your total overtime pay?“

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3. Auto Loan Interest Deduction

ParameterValue
What qualifiesInterest on a car loan for a vehicle purchased NEW in 2025
Maximum deduction$10,000 per year
MAGI phaseout start (Single)$75,000
MAGI phaseout end (Single)$100,000
Eligible vehiclesNew vehicles only (not used); must be purchased in 2025
Schedule 1-A lineLine 3
Who benefits: Anyone who bought a brand-new car in 2025 and is making payments with interest. How it works: Interest paid on a new car loan is deductible up to $10,000. The vehicle must be new (not used) and purchased during the 2025 tax year. Intake question: “Did you buy a brand-new car in 2025? If yes, how much auto loan interest did you pay?”
This plugin’s target user “doesn’t own a car,” but some users in the demographic may have purchased one during 2025. Ask the question anyway.

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4. Senior Standard Deduction Enhancement

ParameterValue
What qualifiesFilers age 65 or older as of Dec 31, 2025
Additional deduction$4,000
MAGI phaseout start (Single)$75,000
MAGI phaseout end (Single)$100,000
Schedule 1-A lineLine 4
Who benefits: Single filers born before January 2, 1961. How it works: This is an additional deduction on top of the regular standard deduction enhancement for seniors. A qualifying senior gets:
  • Regular standard deduction: $15,750
  • Additional standard deduction for 65+: 2,000(builtintothe2,000 (built into the 17,750)
  • Schedule 1-A senior deduction: $4,000 (with phaseout)
The regular additional standard deduction (2,000)hasNOphaseout.TheSchedule1−Aseniordeduction(2,000) has NO phaseout. The Schedule 1-A senior deduction (4,000) DOES phase out at 75K−75K-100K MAGI.

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MAGI Phaseout Calculation

All Schedule 1-A deductions share the same phaseout thresholds: 
if MAGI <= 75,000:
    allowed = full_deduction_amount
elif MAGI >= 100,000:
    allowed = 0
else:
    ratio = (MAGI - 75,000) / 25,000
    allowed = full_deduction_amount * (1 - ratio)
    allowed = round(allowed, 2)
For Schedule 1-A phaseout purposes, MAGI is calculated BEFORE applying Schedule 1-A deductions but AFTER other above-the-line adjustments (like student loan interest from Schedule 1).

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How Schedule 1-A Flows to Form 1040

Schedule 1-A:
  Line 1: Tip income deduction
  Line 2: Overtime pay deduction
  Line 3: Auto loan interest deduction
  Line 4: Senior deduction
  Line 5: Total Schedule 1-A deductions (sum of Lines 1-4)

Form 1040:
  Line 12a: Standard deduction ($15,750 or $17,750)
  Line 12b: Charitable deduction (if not itemizing, usually $0)
  Line 12c: Schedule 1-A deductions (Line 5 from Schedule 1-A)
  Line 14: Total deductions = 12a + 12b + 12c + 13

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Interaction with Other Deductions

  • Schedule 1-A deductions are in addition to the standard deduction
  • They are in addition to Schedule 1 adjustments (student loan interest)
  • They do NOT affect FICA taxes (Social Security and Medicare)
  • They DO reduce federal income tax liability
  • State treatment varies — check individual state rules

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Documentation Requirements

For each Schedule 1-A deduction claimed, the taxpayer should retain:
  • Tips: Pay stubs showing tip income, tip log if self-reported
  • Overtime: Pay stubs showing overtime hours and pay rate
  • Auto loan interest: Form 1098 from lender or year-end loan statement; purchase agreement showing vehicle is new
  • Senior deduction: No additional documentation beyond DOB (already on return)

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