Form 1040 · Schedule 1-A · Tax year 2026
Schedule 1-A: The Four New Deductions for 2026
Schedule 1-A (Form 1040), Additional Deductions, is a new form for tax year 2026. It carries four deductions created by Public Law 119-21: one for tips, one for the overtime premium, one for car loan interest, and one for seniors. All four run for tax years 2025 through 2028 only, all four can be taken whether or not you itemize, and none of them touches payroll tax: they reduce income tax, while Social Security and Medicare tax still apply to the same pay in full.
Last reviewed: November 3, 2026.
Form status: Schedule 1-A is still a draft. The IRS posted the draft on September 4, 2026, and final forms are expected in December 2026 or January 2027. The deduction rules below come from the enacted law and from IRS guidance. Where a rule rests on an IRS fact sheet rather than final regulations, this page says so.
Estimate all four at once: the new deductions estimator takes your figures for all four deductions on one screen and returns four estimated amounts and a total. Each deduction also has its own calculator, linked from its section below.
The four deductions at a glance
| Deduction | Maximum | Phaseout begins (modified AGI) | Where the figure comes from |
|---|---|---|---|
| Tips | $25,000 per return | $150,000 single / $300,000 joint | W-2 Box 12 code TP, with Box 14b |
| Overtime premium | $12,500, or $25,000 joint | $150,000 single / $300,000 joint | W-2 Box 12 code TT |
| Car loan interest | $10,000 | $100,000 single / $200,000 joint | Form 1098-VLI from the lender |
| Seniors, 65 or older | $6,000 per person | Reduced by 6 percent of modified AGI over $75,000 single / $150,000 joint | Nothing new on the W-2 |
Modified adjusted gross income, shortened to modified AGI on this page, is adjusted gross income with certain foreign income amounts added back. Most filers have no such amounts, so for most people it is simply their adjusted gross income.
1. Tips: up to $25,000
| Maximum | $25,000 of qualified tips per return |
|---|---|
| What counts | Voluntary cash tips, reported as income. Service charges are not tips and do not count. A service charge is an amount the business adds itself, such as an automatic charge for a large party. |
| Occupation rule | The tips must be earned in one of the 71 Treasury Tipped Occupation Codes listed in the final Treasury regulations, T.D. 10044 (April 13, 2026). Your employer reports the code for your occupation in Box 14b of your W-2. |
| 2026 reporting rule | The deduction is generally limited to the amount your employer separately reported in Box 12 code TP. This rule is stated in IRS Fact Sheet FS-2026-13, which is guidance, not final regulations. |
| Phaseout | Begins at $150,000 of modified AGI, or $300,000 on a joint return. |
| Still open | The law also excludes tips earned in a specified service trade or business, but that exclusion is still deferred in IRS guidance, so its final reach has not been settled. This page does not present occupation inclusion in the Treasury list as a settled answer for every worker. |
For 2025, the first year of this deduction, more than 7.5 million filers claimed it, with an average claim over $7,000 (Treasury figures reported in Deloitte Tax News and Views, June 5, 2026; IRS Fact Sheet FS-2026-04). Decode codes TP and 14b on the W-2 decoder page.
Estimate the deduction on your own figures with the tips deduction calculator. The complete list of the 71 occupation codes is published on the Treasury Tipped Occupation Codes page.
2. The overtime premium: up to $12,500
| Maximum | $12,500, or $25,000 on a joint return |
|---|---|
| What counts | Only the premium: the extra half in time-and-a-half that the Fair Labor Standards Act requires. If your regular rate is $20 an hour, the premium is the extra $10 for each overtime hour, not the full $30 you were paid for that hour. |
| What does not count | Overtime paid only because of state law, a union contract, or employer policy, where the Fair Labor Standards Act does not require it. |
| 2026 reporting rule | The deduction is limited to the premium your employer separately reported in Box 12 code TT (Fact Sheet FS-2026-13). |
| Guidance level | There are no final regulations for this deduction. The rules rest on IRS Fact Sheet FS-2026-13 (August 6, 2026). Fact sheets are IRS guidance, not binding legal authority, and this page labels the deduction's rules accordingly. |
| Phaseout | Begins at $150,000 of modified AGI, or $300,000 on a joint return. |
For 2025, more than 29 million filers claimed this deduction, with an average claim over $3,100 (Treasury figures reported in Deloitte Tax News and Views, June 5, 2026; IRS Fact Sheet FS-2026-04).
Estimate the deduction on your own figures with the overtime deduction calculator, or compare the code TT amount on your W-2 with your own pay stub math in the overtime premium checker.
3. Car loan interest: up to $10,000
| Maximum | $10,000 of interest per return |
|---|---|
| Vehicle rule | The vehicle must be new, and its final assembly must have occurred in the United States. |
| Loan rule | The loan must have originated after December 31, 2024, and be secured by the vehicle. |
| The statement | Lenders report the interest on a new statement, Form 1098-VLI. The first statements, covering 2026, arrive in January 2027. |
| On the return | The law requires the vehicle identification number (VIN) of the vehicle to be reported with this deduction. |
| Phaseout | Begins at $100,000 of modified AGI, or $200,000 on a joint return. |
For 2025, more than 1.4 million filers claimed this deduction, with an average claim over $1,800 (Treasury figures reported in Deloitte Tax News and Views, June 5, 2026; IRS Fact Sheet FS-2026-04).
Estimate the deduction on your own figures with the car loan interest calculator, which also explains Form 1098-VLI.
4. Seniors: $6,000 per person aged 65 or older
| Amount | $6,000 for each filer aged 65 or older. Where both spouses are 65 or older on a joint return, the amount before the phaseout is $12,000. |
|---|---|
| Phaseout | The deduction is reduced by 6 percent of the amount by which modified AGI exceeds $75,000, or $150,000 on a joint return. |
| Stacking | This deduction is in addition to the standard deduction and in addition to the existing extra standard deduction amount for being 65 or older. It does not replace either one. |
| Modified AGI | Amount over $75,000 | Reduction at 6 percent | Deduction |
|---|---|---|---|
| $75,000 | $0 | $0 | $6,000 |
| $85,000 | $10,000 | $600 | $5,400 |
| $100,000 | $25,000 | $1,500 | $4,500 |
| $125,000 | $50,000 | $3,000 | $3,000 |
| $175,000 | $100,000 | $6,000 | $0 |
For 2025, more than 35 million filers claimed this deduction, with an average claim over $7,500 (Treasury figures reported in Deloitte Tax News and Views, June 5, 2026; IRS Fact Sheet FS-2026-04).
Work out the deduction and its phaseout on your own figures with the senior deduction calculator.
Rules all four share
- Years: tax years 2025 through 2028 only. The four deductions expire after 2028 unless Congress extends them.
- Itemizing: not required. Each deduction is available whether you take the standard deduction or itemize.
- Payroll tax: these deductions reduce income tax only. Social Security and Medicare tax still apply to the same pay in full.
- Deductions, not credits: a deduction reduces the income your tax is figured on. It does not reduce your tax dollar for dollar.
- The reporting limit: for 2026, the tips and overtime deductions are generally limited to what your employer separately reported, per Fact Sheet FS-2026-13. The only correction route the IRS describes is a corrected W-2, Form W-2c, from the employer.
Not on Schedule 1-A: the new charitable deduction for people who do not itemize. On the draft 2026 Form 1040, it sits with the standard deduction lines on the form itself. It has its own page and calculator: the charitable deduction calculator.
Sources
- Public Law 119-21, enacted July 4, 2025. Created the four deductions, their caps, phaseouts, and the 2025 to 2028 window.
- Treasury Decision 10044, April 13, 2026. Final regulations for the tips deduction, carrying the 71 Treasury Tipped Occupation Codes.
- IRS, Fact Sheet FS-2026-13, August 6, 2026. The 2026 reporting rules for the tips and overtime deductions. Source level: guidance, not binding legal authority.
- IRS, Fact Sheet FS-2026-04, and Treasury claimant figures reported in Deloitte Tax News and Views, June 5, 2026. Tax year 2025 claimant counts and averages.
- IRS, Draft Tax Forms listing. Draft Schedule 1-A posted September 4, 2026. Draft document, not for filing.
Last reviewed: November 3, 2026. This page will be rechecked the day the IRS publishes the final Schedule 1-A and the final 2026 Form 1040 instructions.