Schedule 1-A: How to Claim the Tips and Overtime Deduction

Schedule 1-A is the IRS form you use to claim the new deductions for qualified tips and qualified overtime, and you attach it to your Form 1040. You do not need to itemize. You fill in your income, enter the eligible amounts from your pay records, and carry the total to your return.

The IRS released the 2025 Schedule 1-A on March 2, 2026, according to law firm Parsons Behle's summary of the announcement. This guide shows who qualifies, what to gather, and how to complete the PDF part by part so you are ready well before the 2027 filing season.

Who Can Claim the Deductions

The deductions came from the 2025 tax law known as the One Big Beautiful Bill Act and apply to tax years 2025 through 2028, per tax software company Instead's explainer. A few rules decide whether you qualify:

• Tips: Voluntary tips received in an occupation where tipping is customary, such as food service, hospitality, or personal care, can be deducted up to $25,000 per year. Mandatory service charges do not count as tips.
• Overtime: Non-exempt employees under the Fair Labor Standards Act can deduct qualified overtime pay, up to $12,500 per year ($25,000 on a joint return). Salaried exempt employees generally cannot claim it. The deduction targets the extra premium portion of overtime pay, not your whole overtime paycheck, so do not simply enter your total overtime earnings.
• Phaseout: Both deductions shrink once modified adjusted gross income (MAGI) passes $150,000 ($300,000 for joint filers).
• Payroll taxes still apply: Social Security and Medicare tax are still due on these amounts. Only income tax is reduced.

Schedule 1-A also covers a car loan interest deduction (up to $10,000 on qualifying new, U.S.-assembled vehicles), which uses its own part of the form. This guide focuses on tips and overtime. Check the IRS instructions for Schedule 1-A for filing status and Social Security number requirements that apply to your situation.

Records to Gather Before You Start

2025 was a transition year. Parsons Behle notes that employers were not yet required to report tips and overtime separately, and Forms W-2 and 1099 were not revised with dedicated fields for 2025. That means you may have to build the numbers yourself. Collect:

1. Your Form W-2 or 1099 and your final pay stub of the year.
2. Pay stubs or payroll reports that break out overtime hours and the overtime premium.
3. Your own tip log, credit card tip reports, or any tip statements from your employer.
4. Your prior-year return, so your MAGI estimate is grounded in real numbers.

Ask your payroll department for a year-to-date overtime premium report. Many payroll systems can print one in a minute, and it is far more reliable than adding up pay stubs by hand. Also check your W-2 first. If your employer already excluded some amounts, do not claim them a second time.

Step by Step: Filling Out the PDF

You can complete the form on screen instead of printing it. Here is the flow with PDF Editify:

1. Open our fill PDF tool and upload the Schedule 1-A PDF. You can also start from the IRS forms in our IRS tax form templates.
2. Click each field and type your answers. Use the checkbox and text tools for anything that is not an interactive field.
3. Part I, MAGI: Enter your modified adjusted gross income. This number drives the phaseout, so work it out from your Form 1040 before you start. If you are well under the threshold, the phaseout will not reduce your deduction.
4. Part II, tips: Enter your qualified tips, then follow the form's lines to apply the $25,000 limit and any phaseout.
5. Part III, overtime: Enter your qualified overtime amount, then follow the lines for the $12,500 or $25,000 limit and phaseout.
6. Add up the deductions the form asks you to total, and carry that figure to your Form 1040. If you only claim overtime, the total is just your overtime result.
7. Download the finished PDF, then attach it to your return.

A worked example

Say Maria is a single hotel concierge. She received $14,000 in voluntary tips and her MAGI is $62,000. She is far below the $150,000 threshold, so no phaseout applies. Her tip deduction is $14,000, since it is under the $25,000 cap. If she also worked eligible overtime, she would repeat the process in Part III and add the two results. Her payroll taxes are unchanged, but her taxable income drops by the deduction. Your numbers will differ, so use your own records and the form's instructions.

Phaseouts and Limits to Watch

The caps are per return, not per job. A person with two tipped jobs adds the tips together before applying the $25,000 limit. Joint filers get a larger overtime cap ($25,000), and a higher MAGI threshold ($300,000).

Tips and overtime figures are from Instead's 2026 explainer. Confirm the final numbers against the IRS instructions, since they are the authority.

Where the Deduction Goes on Form 1040

The total from Schedule 1-A feeds into the deductions section of your Form 1040, and it is available whether you take the standard deduction or itemize. If you are new to the main return, our guide to what the IRS 1040 form is explains how each section fits together. Keep your tip logs, overtime reports, and a copy of the completed Schedule 1-A with your tax records for at least three years.

Who Should Double-Check Before Filing

Some situations deserve a second look before you rely on the form. If you are self-employed, tips and overtime rules differ from those for W-2 employees, so read the IRS instructions closely. If you changed jobs mid-year, combine the records from every employer before you apply any cap. If your household income sits near the phaseout range, run the MAGI calculation twice, because small changes in income can shift the deduction. And if you are married, decide early whether you are filing jointly, since the caps and thresholds depend on it. A few minutes of checking now is cheaper than correcting the return later.

Filling Out the Form Without a Subscription

Filing taxes is a once-a-year task, and paying for a year-round PDF subscription to complete one schedule rarely makes sense. PDF Editify is a paid product, and you can try the editor without entering a card, but exporting requires a plan. The One Week Plan costs $3 one-time, expires on its own, and leaves nothing to cancel. Compare that with the $10 per month Standard plan or an annual subscription from a typical PDF suite. If you expect to fill forms all year, the $100 yearly plan or a Lifetime option from $99 may suit you better. See all plans on the pricing page.

When you are done, you can also sign the PDF in the same session before you file.

Common Mistakes to Avoid

• Entering total overtime pay instead of the qualified premium portion. Ask payroll for the correct figure.
• Counting mandatory service charges as tips. They do not qualify.
• Claiming an amount your employer already excluded on your W-2.
• Skipping the MAGI step. A wrong MAGI can overstate your deduction.
• Losing your records. If the IRS asks, a tip log and payroll report are your proof.

If your return is complex, a tax professional can confirm your eligibility. This article is general information, not tax advice.