What is reported on Schedule 1-A?
Beginning in tax year 2025, Schedule 1-A is used to calculate and report four below-the-line deductions introduced in The One Big Beautiful Bill of 2025:
- No Tax on Tips
- No Tax on Overtime
- No Tax on Car Loan Interest
- Enhanced Deduction for Seniors
Each deduction is subject to a limitation based on Modified AGI (MAGI). For the purposes of Schedule 1-A, MAGI consists of AGI plus excluded income from bona fide residents of American Samoa and Puerto Rico, plus any foreign income exclusion, foreign housing exclusion, and/or foreign housing deduction. ProWeb calculates MAGI based on the information entered elsewhere in the return.
Tip and overtime income deducted on Schedule 1-A is still considered earned income for the purposes of the Earned Income Tax Credit and the Child Tax Credit.
The No Tax on Tips, No Tax on Overtime, and Enhanced Deduction for Seniors each have two requirements:
- The taxpayer (and spouse, if filing jointly) must have a Social Security Number;
- Married couples must file jointly.
TaxSlayer ProWeb calculates the enhanced deduction for seniors based on the taxpayer and spouse date of birth entered in Personal Information. Thus, you won't see a menu for it on-screen.
Completing Schedule 1-A
In ProWeb, the Schedule 1-A menu has the following three menus.
No Tax on Overtime
The No Tax on Overtime deduction is calculated in Part III of Schedule 1-A. The employer will need to have furnished the employee with a statement indicating how much of their pay reported in Box 1 of Form W-2 is overtime pay.
The individual claiming this deduction, whether taxpayer or spouse, must have a valid Social Security number. Married taxpayers must file jointly to claim this deduction. (In a return being filed MFS, the overtime amount can be entered in Schedule 1-A, but no credit will calculate.)
The No Tax on Overtime deduction is phased out by $100 for every $1,000 that the taxpayer's MAGI is over the following thresholds:
- Single, Head of Household, Qualified Surviving Spouse - $150,000
- Married Filing Jointly - $300,000
To enter information for the No Tax on Overtime deduction in TaxSlayer ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Deductions
- Additional Deductions
-
No Tax on Overtime
- Qualified overtime compensation included on Form W-2, Box 1 - Enter the amount of overtime premium reported to the taxpayer with their Form W-2, if any. Overtime premium is the additional pay beyond the regular pay they earned for working overtime. For tax year 2025, the IRS encouraged employers to report the premium amount in W-2 Box 14, but they might also be report it to the taxpayer on a separate statement.
- Qualified overtime compensation included on Form 1099-NEC, 1099-MISC - Enter the amount of overtime reported to the taxpayer on their 1099-MISC or NEC, if any.
No Tax on Tips
The No Tax on Tips deduction is calculated in Part II of Schedule 1-A. Tips will continue to be reported on Form W-2 and continue to be subject to federal income tax withholding along with FICA and Medicare tax.
The deduction is for "qualified tips", meaning tips paid by cash or charge and received by an individual in an occupation which customarily and regularly receives tips, including tips in a tip-sharing arrangement. The Treasury Department list of the occupations that qualify the taxpayer for the No Tax on Tips deduction, with their assigned Treasury Tipped Occupation Code (TTOC), can be found here.
The individual claiming this deduction, whether taxpayer or spouse, must have a valid Social Security number. Married taxpayers must file jointly to claim this deduction.
The No Tax on Tips deduction is phased out by $100 for every $1,000 that the taxpayer's MAGI is over the following thresholds:
- Single, Head of Household, Qualified Surviving Spouse - $150,000
- Married Filing Jointly - $300,000
Before entering information for the No Tax on Tips deduction, be sure you have completed Form 4137, Social Security and Medicare Tax On Unreported Tip Income, if needed.
To enter information for the No Tax on Overtime deduction in TaxSlayer ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Deductions
- Additional Deductions
-
No Tax on Tips
- Qualified tips included on Form W-2, box 7 - Enter the amount of qualified tips in box 7 of all Forms W-2. Be sure the W-2 is from an employer with a TTOC in the list.
- Qualified tips included on Form 4137, Line 1(c) - Enter the amount on Form 4137 line 1(c), if that form was completed.
- Qualified tips included on Form 1099-NEC, 1099-MISC or 1099-K - Enter the amount of tips, if any, reported on Forms 1099-K, MISC, or NEC.
No Tax on Car Loan Interest
The No Tax on Car Loan Interest deduction is calculated in Part IV of Schedule 1-A. The deduction is up to $10,000 in qualifying passenger vehicle loan interest.
The No Tax on Car Loan Interest deduction has the following qualifications:
- The loan must be used to purchase a new passenger vehicle on or after January 1, 2025.
- The vehicle must be for personal use only. Vehicles used in business, fleet sales, used vehicles, leased vehicles, commercial vehicles, vehicles with a salvage title, and vehicles to be used for scrap or parts do not qualify.
Vehicles that qualify for this credit must meet the following conditions:
- final assembly is in the United States (use a VIN Decoder to verify the final assembly),
- original user is the taxpayer,
- manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails),
- has at least 2 wheels,
- a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle,
- treated as a motor vehicle for purposes of title II of the Clean Air Act, and
- gross vehicle weight rating of less than 14,000 pounds.
The No Tax on Car Loan Interest deduction is phased out by $200 for every $1,000 that the taxpayer's MAGI is over the following thresholds:
- Single, Head of Household, Qualified Surviving Spouse - $100,000
- Married Filing Jointly - $200,000
The taxpayer may receive from the lender either Form 1098-VLI or a separate statement reporting the interest paid on the loan.
To enter information for the No Tax on Car Loan Interest deduction in TaxSlayer ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Deductions
- Additional Deductions
-
No Tax on Car Loan Interest
- Vehicle Identification Number - Enter the 17-character VIN.
- Dates new vehicle purchased - Enter the date the vehicle was purchased.
- Interest deducted on Schedule C, E, or F - Enter the amount of loan interest for this vehicle that was deducted on either Schedule C, E, or F.
- Interest being deducted on Schedule 1-A - Enter the amount of loan interest being deducted here.
The sum of the two dollar amounts of interest should equal the total qualifying vehicle loan interest that is being deducted in the tax return.
When finished enter the vehicle's information, if you have another vehicle to enter, select + Add another item. The form includes space for two vehicles, and additional vehicles will be noted on an overflow statement.
Enhanced Deduction for Seniors (Part V)
The Enhanced Deduction for Seniors is calculated in Part V of Schedule 1-A. A taxpayer and spouse age 65 or older at the end of the tax year can each claim a below-the-line $6,000 deduction.
The individual claiming this deduction, whether taxpayer or spouse, must have a valid Social Security number. Married taxpayers must file jointly to claim this deduction.
This deduction is intended to help offset taxes on Social Security benefits, however the taxpayer is not required to have Social Security benefits in order to claim the deduction. Additionally, the Enhanced Deduction for Seniors is available to taxpayers that are claiming the standard deduction as well as those that are itemizing deductions.
The Enhanced Deduction for Seniors is reduced at the rate of 6% of the amount the taxpayer's MAGI exceeds the following thresholds:
- Single, Head of Household, Qualified Surviving Spouse - $75,000
- Married Filing Jointly - $150,000
Additional Information:
Treasury Tipped Occupation Codes (TTOC)
TaxSlayer Pro strives to make the information on this page timely and accurate but makes no promise or guarantee about the timeliness, accuracy, or completeness of the contents of this page. This is general information and is not intended to be tax advice. You are encouraged to also review the underlying federal resources and publications.