The IRS has released a draft of an IRS tax form (Schedule 1-A) for the deductions introduced under the One Big Beautiful Bill in July 2025. Taxpayers planning to claim the tax deductions on tips, overtime, and others under the OBBBA bill can learn about this newly introduced IRS form to claim them.
Since the announcement of the new deductions, taxpayers were wondering how they would claim deductions, as there were no separate forms. Now, the IRS has worked on this issue and released the form, which is in draft stage, meaning yet to be finalized for filing.
The tax deductions introduced on the OBBBA bill are temporary from 2025 to 2028; hence, the IRS form will also be temporary if it is finalized. The draft version of the IRS Schedule 1-A is available on the IRS official website for preparation.
Who will use the new IRS Schedule 1-A?
Taxpayers who qualify for one or more tax deductions introduced in the OBBBA bill and wish to claim them, such as:
- Employees who receive tips
- Additional deduction for seniors aged 65 or above
- Workers who work overtime and are qualified for overtime compensation.
- Individuals who paid interest on a qualified vehicle loan, that is, a loan issued after 31 December 2024, for a personal use vehicle, not for used vehicles, and secured by a lien on the car.
What are the parts of Schedule 1-A?
The draft of Schedule 1-A has been released, and taxpayers qualifying for the OBBBA deductions should understand the form well to file it later with their tax return. Here, you can get the detailed explanation of the Schedule 1-A parts:
- Part I (Modified Adjusted Gross Income): You have to enter your amount from Form 1040, 1040-SR, and others to let the agency know about your taxable income.
- Part II (no tax on tips): This part is for your qualified tips from the listed occupation you have received in the tax year. You will calculate your qualified tips deduction in this part.
- Part III (No tax on Overtime): Here, you will enter your received qualified overtime compensation to determine your qualified overtime deduction for the tax year.
- Part IV (No tax on car loan interest): Here, you will enter your paid car loan interest in the tax year, vehicle identification number, and calculate the tax deduction on the paid car loan interest.
- Part V (Additional Deduction for Seniors): If you qualify for the enhanced deduction for seniors, you can enter the taxable amount, and based on the income, enter your deduction amount.
- Part VI: In this portion, you enter your overall deduction claimed on the Form Schedule 1-A.
What deduction amounts are allowed under the IRS Schedule 1-A?
If you wish to claim the OBBBA deduction once you qualify for it, you should know how much deduction is permissible under the new tax provisions:
- Tax Deduction on Tips:
- The maximum deduction for qualified tips is $25,000, and the phase-out begins when your MAGI exceeds $150,000 (for single filers) or $300,000 (for joint filers).
- Tax Deduction on Overtime:
- The maximum deduction on the qualified overtime compensation is $12,500 (for single filers) and $25,000 (for joint filers).
- The phaseout of the deduction begins when the MAGI is over $150,000 (for single filers) and $300,000 (for joint filers).
- Tax deduction on car loan interest:
- The maximum annual deduction allowed on the paid car loan interest is $10,000, and it will phase out if the MAGI is over $100,000 (for single filers) and $200,000 (for joint filers).
- Additional Seniors:
- Seniors who qualify for the additional deduction can get the maximum deduction of $6000 and $12,000 (if married and filing jointly).
- The additional deduction for seniors will begin to phase out if the senior’s income is over $75,000 or $150,000 (for joint filers).
When can you expect the final version of the Schedule 1-A?
As mentioned above, the IRS Form Schedule 1-A is in draft stage only; it is not filed IRS Form, so you cannot file it. The IRS has released the draft to allow taxpayers to prepare and collect feedback on the form from tax professionals, taxpayers, and other stakeholders before the final release.
The draft form will be approved by the Office of Management and other officials before its final release. The taxpayers can expect the IRS to make some changes or adjustments in the lines if they get some feedback and release the form in December 2025 or January 2026.
You can find the final version of the IRS Schedule 1-A on the IRS official forms if it is released, and download it or use it while filing your tax return to claim the deduction. Until then, prepare for the claim based on the form and gather all the documents.
Disclaimer: Schedule 1-A details may change; rely on IRS instructions for final guidance.