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Schedule 1-A Walk-Through: Tips and Overtime Line by Line

Short answer: Schedule 1-A (Form 1040) has a MAGI part (I), a tips part (II) and an overtime part (III), plus car loan interest and seniors parts. This page walks through Parts I to III of the 2025 schedule. The 2026 form was not read.

Before you start

• Valid SSN (and spouse's, if joint). Married couples must file jointly to claim these deductions.
• Tips: only in an occupation listed at IRS.gov/TippedOccupations (check).

Part I: MAGI

Line 1: Form 1040 line 11b. Line 2a to 2d: excluded Puerto Rico income; Form 2555 lines 45 and 50; Form 4563 line 15. Line 2e: add them. Line 3: lines 1 plus 2e.

Part II: No tax on tips

• 4a: W-2 box 7 qualified tips (see instructions if box 5 is more than $176,100 or some tips weren't subject to social security and Medicare tax).
• 4b: Form 4137 line 1, row A, column (c), else -0-.
• 4c: larger of 4a and 4b if one employer; multiple employers or occupations, see the instructions (enter -0- in 4a and 4b).
• 5: tips in a trade or business (1099-NEC box 1, 1099-MISC box 3, 1099-K box 1a), not more than net profit.
• 6: 4c plus 5. 7: smaller of line 6 or $25,000.
• 8 to 13: phase-out; see phase-out. Line 13 is the tips deduction.

Part III: No tax on overtime

• 14a: qualified overtime in W-2 box 1 (see instructions if not on the W-2). 14b: 1099-NEC/1099-MISC. 14c: total.
• 15: smaller of 14c or $12,500 ($25,000 MFJ). 16 to 20: phase-out. 21: the overtime deduction.
• Parts IV and V (car loan interest, seniors) then Part VI line 38 totals the deductions and goes to Form 1040 line 13b (1040-NR line 13c).

Made-up example

Single filer, one employer, W-2 box 7 $12,000, no Form 4137, premium overtime $4,000, MAGI $120,000.

• Line 4a $12,000; 4b -0-; 4c $12,000; line 6 $12,000; line 7 $12,000.
• MAGI is below $150,000: line 10 is zero or less, so line 13 = $12,000.
• Line 15 $4,000; line 21 = $4,000.
• Total from these parts: $16,000, entered with other parts on line 38. (Illustrative only.)

Stumbling points

• Using total overtime pay instead of the premium portion (see).
• Counting mandatory service charges as tips (see).
• Forgetting the SSN and joint-filing conditions.
• A W-2 that shows no separate tips or overtime (see) or new 2026 codes (see).
• Filed already? Amending.

Try the estimator

Our free in-browser estimator follows the separate Part II (tips) and Part III (overtime) lines described above. Nothing you type is stored or sent.

FAQ

Does this work if I take the standard deduction? Yes: FS-2025-03 says available to itemizers and non-itemizers.

Which lines change for 2026? Unknown until the 2026 form is read.

What we could not verify

• The 2026 Schedule 1-A and instructions.
• IRS instructions for multi-employer and multi-occupation cases.
• Software behaviour of any product.

Sources (IRS)

• IRS, Schedule 1-A (Form 1040), Additional Deductions, 2025 (created 11/4/25) — https://www.irs.gov/pub/irs-prior/f1040s1a--2025.pdf (read October 17, 2026)
• IRS, One Big Beautiful Bill Act: Tax deductions for working Americans and seniors, FS-2025-03 (July 14, 2025; updated July 25) — https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors (read October 17, 2026)
• IRS, General Instructions for Forms W-2 and W-3 (2026) (Jan 29, 2026) — https://www.irs.gov/pub/irs-pdf/iw2w3.pdf (read October 17, 2026)
• IRS, Notice 2025-69 (transition relief for tax year 2025) — https://www.irs.gov/pub/irs-drop/n-25-69.pdf (read October 17, 2026)

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Not tax advice. Examples use made-up figures. Nothing here has been reviewed by a tax professional. See the disclosure.