The IRS is rolling out a major update for the 2025 tax year: Schedule 1-A. This new form allows taxpayers to claim deductions on tips, overtime pay, car loans for U.S.-made vehicles, and a special deduction for seniors. The schedule comes as part of the One Big Beautiful Bill Act and is set to be in effect from 2025 through 2028.
For millions of Americans, this is a significant development. Workers in service industries, hourly employees, and seniors now have more ways to reduce their taxable income. The IRS emphasizes that these deductions are available whether you take the standard deduction or itemize, which means almost all taxpayers can benefit. While there are income limits and certain restrictions, Schedule 1-A could have a meaningful impact for those eligible.
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Who Can Benefit from Schedule 1-A?
The deductions are designed to help a wide range of people. The four main areas include:
- Tips: Cash tips, credit card tips, gift cards, casino chips, and dollar-stablecoins all qualify. Cryptocurrency like Bitcoin does not count. Nearly 70 occupations are eligible, including bartenders, delivery drivers, hairstylists, casino dealers, and even clowns. The IRS is accepting public feedback until October 23, so more jobs may be added.
- Overtime Pay: Part of your extra wages can now be deducted, helping those who rely on overtime for income.
- Car Loans: If you buy a new U.S.-assembled car in 2025, the interest on your loan may be deductible. You must list your vehicle’s VIN to claim this benefit.
- Seniors: Taxpayers aged 65 and older can claim an additional $6,000 deduction, though it starts to phase out for singles earning above $75,000 and couples earning above $150,000.
These deductions are “below-the-line,” meaning they reduce taxable income but do not affect your adjusted gross income (AGI). Still, they are available to everyone, not just those who itemize.
How Much Can You Save? Key Deductions at a Glance
Here’s a simple table showing the four main deductions, their limits, and who can claim them:
| Deduction Type | What It Covers | Income Phase-Out | Maximum Deduction |
|---|---|---|---|
| Tips | Cash, credit, gift cards, casino chips, stablecoins | $150,000 (single) / $300,000 (joint) | $25,000 |
| Overtime Pay | Partial deduction of extra wages | Subject to income reduction | Variable |
| Car Loan Interest | Interest on new U.S.-assembled vehicles purchased in 2025 | N/A | Interest only |
| Senior Deduction | Extra deduction for taxpayers aged 65+ | $75,000 (single) / $150,000 (joint) | $6,000 |
Tips for Using Schedule 1-A
Taxpayers should start preparing early to maximize these deductions. Key points include:
- Keep detailed records of tips, overtime pay, and car loan interest.
- Make sure your car is U.S.-assembled and record the VIN.
- Track income to understand phase-out limits for tips and the senior deduction.
- Check IRS.gov for updates and the finalized Schedule 1-A form.
By carefully documenting eligible income and expenses, you can avoid mistakes and take full advantage of the deductions.
Why This Matters for Millions of Americans
Schedule 1-A represents one of the most significant tax changes in years. Service workers, hourly employees, and seniors will finally see tangible tax relief. For example, the tip deduction alone could save thousands of dollars for bartenders, waitstaff, and casino employees. The overtime deduction helps those whose earnings rely on extra hours, while the car loan interest deduction encourages the purchase of American-made vehicles. Seniors benefit from a straightforward $6,000 boost to their standard deduction, helping to offset rising living costs.
Even though these deductions are temporary and have income limits, they offer a meaningful chance for taxpayers to reduce their tax bills. Keeping accurate records and staying informed about IRS updates will be key to making the most of Schedule 1-A.
The 2025 IRS Schedule 1-A provides new tax breaks that could help millions of Americans save money. Whether you’re earning tips, working overtime, buying a new U.S. made car, or are 65 and older, these deductions give you an opportunity to lower your taxable income. Start tracking your income and expenses now, and watch for the final IRS form later in 2025 to ensure you don’t miss out on these new benefits.
For the latest updates, visit the IRS Newsroom and review guidance on Schedule 1-A. This is a rare opportunity to claim deductions that are both modern and widely available making your 2025 tax return potentially more rewarding than ever.
Frequently Asked Questions (FAQs)
Q1. What is IRS Schedule 1-A?
Schedule 1-A is a new tax form for 2025-2028 that allows taxpayers to claim deductions for tips, overtime pay, car loans on U.S.-made vehicles, and a special deduction for seniors.
Q2. Who can claim deductions for tips?
Nearly 70 occupations are eligible, including bartenders, delivery drivers, hairstylists, casino dealers, and performers. Tips can include cash, credit cards, gift cards, casino chips, and stablecoins (excluding cryptocurrencies like Bitcoin).
Q3. Can overtime pay be deducted on Schedule 1-A?
Yes. Part of your overtime or extra wages can now be deducted to help reduce taxable income, subject to income limitations.
Q4. How does the senior deduction work?
Taxpayers aged 65 and older can claim an additional $6,000 deduction. The deduction phases out for singles earning above $75,000 and couples above $150,000.
Q5. Is the car loan interest deduction available to everyone?
No. It applies only to new U.S.-assembled vehicles purchased in 2025. To claim it, you must list your vehicle’s VIN and ensure it meets the eligibility criteria.
