Schedule 1-A Carries All Four OBBB Deductions, and None of Them Lowers AGI

Schedule 1-A puts the One Big Beautiful Bill Act's four deductions (up to $25,000 in tips, $12,500 in overtime premium, $10,000 in car-loan interest, and $6,000 per person 65 or older) on one two-page form, feeds all four from a single modified-AGI figure computed at the top, and sends one total to Form 1040 line 13b. Line 13b sits below adjusted gross income, so nothing on this schedule changes AGI or any figure computed from it.

The schedule debuted for the 2025 tax year, on the return filed in 2026, and joined Schedules 1, 2, and 3 on the IRS's roster of numbered Form 1040 attachments. Its dollar figures hold for 2026: the Act wrote every cap and threshold as a flat amount with no inflation adjustment, and Rev. Proc. 2025-32, which sets the 2026 values for the figures the Act did index, adjusts none of them. All four deductions run only through tax year 2028.

Six parts, thirty-eight lines

Part I (lines 1–3) computes the modified adjusted gross income every later part tests. Line 1 takes AGI from Form 1040 line 11b; lines 2a–2d add back income excluded under the foreign earned income and possessions rules of §§911, 931, and 933: excluded Puerto Rico income, Form 2555 amounts, Form 4563 amounts. A worker with none of those exclusions has a line 3 equal to AGI.

Parts II through V then run the four deductions, in the order and with the limits the printed schedule fixes for tax years 2025 through 2028:

Source: Schedule 1-A (Form 1040), 2025, as printed; endpoints computed from the phase-out arithmetic of §§224, 225, 163(h)(4), and 151(d)(5). A deduction smaller than the cap reaches zero sooner.

Part VI is one line. Line 38 adds lines 13, 21, 30, and 37 and carries the sum to Form 1040 line 13b (13c on Form 1040-NR).

The parts carry their own bookkeeping. Part II splits tips received as an employee (line 4, from W-2 box 7 or Form 4137) from tips received in a trade or business (line 5, from a 1099-NEC, 1099-MISC, or 1099-K, capped at that business's net profit). Part IV asks for each vehicle's VIN and, in column (ii), subtracts any interest already deducted on Schedule C, E, or F, so business-use interest cannot be claimed twice. Part V grants the $6,000 by birthdate: line 36a pays out only to a filer born before January 2, 1961, line 36b to a spouse who clears the same date.

Below the line, beside the standard deduction

On the 2025 Form 1040, adjusted gross income is settled at line 11a and restated at 11b. The deduction stack comes after: line 12e holds the standard deduction ($15,750 for a 2025 single filer) or itemized deductions, line 13a the QBI deduction, line 13b the Schedule 1-A total. Line 14 adds the three and line 15 subtracts them from AGI to reach taxable income.

Two consequences follow from that geography. The four deductions stack on whichever of line 12e you take. §§70201(b), 70202(b), and 70203(b) of the Act each add their deduction to §63(b), the list of deductions a non-itemizer may claim, and the senior deduction reaches non-itemizers through §151, a deduction already on that list. The IRS states the result plainly: each deduction is available "whether they itemize deductions or claim the standard deduction". And because AGI never moves, neither does anything keyed to it: the taxable share of Social Security benefits, Medicare's income-related premium surcharges, or a state return that starts from federal AGI. An earlier version of this article described the form as five lines of above-the-line deductions flowing through Schedule 1 to reduce AGI; the form has never worked that way, and the fix is logged at Corrections.

One income, four phase-outs

Take P3, TaxMath's standing $185,000 single filer with investment income: $185,000 of wages plus $15,000 of long-term gains puts AGI at $200,000, and with no foreign exclusions, line 3 lands there too. Part II works the tip phase-out in five lines. Line 10: $200,000 − $150,000 = $50,000 over the threshold. Line 11: $50,000 ÷ $1,000 = 50. Line 12: 50 × $100 = $5,000. Line 13: a full $25,000 of qualified tips keeps $25,000 − $5,000 = $20,000 of deduction. The same $5,000 comes off the overtime cap in Part III, leaving $7,500. Part IV and Part V produce zeros at that income: the car-loan reduction is 100 × $200 = $20,000 against a $10,000 cap, and the senior reduction is 6% × $125,000 = $7,500 against $6,000.

The three shapes in that example are the form's real curriculum. Tips and overtime shrink by $100 for each full $1,000 of MAGI above the threshold (§§224(b)(2), 225(b)(2)), and lines 11 and 19 round down, so the first $999 over the line costs nothing. Car-loan interest shrinks by $200 for each $1,000 "or portion thereof" (§163(h)(4)), and line 28 rounds up: at $150,999 of MAGI a single filer's tip deduction is still whole, while at $100,999 the car-loan deduction has already lost $200. That ceiling is also why the car-loan column above reads "above $149,000" rather than $150,000 — the last $200 of deduction dies a thousand dollars early. The senior phase-out steps nowhere: line 34 multiplies the excess over $75,000 by 6% and subtracts the exact product.

The cautions are the eligibility rules

Each part opens with a printed caution, and the cautions carry the statute's gates. Part II admits only tips received in an occupation on the Treasury list the form points to at IRS.gov/TippedOccupations. Parts II, III, and V all require a valid Social Security number and, for married filers, a joint return — §§224(e)–(f), 225(d)–(e), and 151(d)(5) put separate filers' deductions at zero. Part IV's caution demands neither; it wants the VIN. A married couple filing separately keeps just one of the four, the car-loan interest.

The 2025 paperwork trails the law. Forms W-2 and 1099 for 2025 do not separately report qualified tips, and per the same IRS guidance, qualified overtime "will likely not be separately identified" either, so the first Schedule 1-A season runs on tip logs, pay stubs, payroll summaries, and a lender's interest statement. The occupation codes, the half-time overtime definition, and the vehicle assembly test each have their own article: tips and overtime, car-loan interest, and the senior deduction.

Two starting points, two state answers

Whether a state ever sees Schedule 1-A depends on one line of state law: which federal figure the state return starts from. New York starts from federal adjusted gross income: Tax Law §612(a) defines a resident's New York AGI as "federal adjusted gross income... with the modifications specified in this section." Line 13b sits below that starting point, so none of the four deductions ever reaches a New York return. Colorado starts on the far side of the deduction stack, from federal taxable income (C.R.S. §39-22-104), the line 15 figure the Schedule 1-A total has already reduced.

Colorado's legislature then edited what flows through. HB25-1296, signed May 16, 2025, adds federally deducted overtime back to Colorado taxable income, and the state's guidance pins the years: the addback applies "for tax years 2026 and later" and takes "the full amount of the federal deduction claimed on the taxpayer's IRS Schedule 1-A," while "no addback is required... for qualified tips". So a $65,000 bartender deducting $18,000 of reported tips (the worked example in our tips article) saves an extra $18,000 × 4.40% = $792 on a 2026 Colorado return; our 2026 Colorado entry is provisional, with the reason on the status board. A coworker's overtime deduction reached Colorado's base for tax year 2025 only; from 2026 it goes back in.

Four totals, then the form retires

Sections 224(h) and 225(g) allow no deduction for any taxable year beginning after December 31, 2028, and the car-loan and senior provisions write the same endpoint into their own text as a taxable-year window. Unless Congress extends what it enacted, line 38 will carry a total on exactly four returns: the ones filed in 2026, 2027, 2028, and 2029.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.