• Home
  • Blog
  • Draft Schedule 1-A (2025): How the Four OBBBA Deductions Work—and Where They Flow on Form 1040

Draft Schedule 1-A (2025): How the Four OBBBA Deductions Work—and Where They Flow on Form 1040

2025/11/03

The IRS has posted a draft of Schedule 1‑A (Form 1040), creating a single place to compute four new deductions from the One Big Beautiful Bill Act (OBBBA). Below, we explain how the math works, where Modified Adjusted Gross Income (MAGI) fits in, and how your final total lands on Form 1040 line 13b.

Start here: calculate MAGI

Part I of Schedule 1‑A walks you from AGI on Form 1040 line 11b to MAGI by adding back specific items (e.g., excluded Puerto Rico income and foreign earned income). This MAGI figure drives phaseouts for each deduction. See the draft Schedule 1‑A for exact line‑by‑line steps.

The four new deductions (and their formulas)

1) “No Tax on Tips” (Part II) — Cap: up to $25,000 per year. Eligibility: qualified tips in occupations the IRS lists as “customarily and regularly” tipped; employees and some self‑employed may qualify, with joint filing and SSN requirements. Phaseout: starts at $150,000 MAGI ($300,000 MFJ). Formula: after you compute qualified tips and apply the $25,000 cap, reduce the result by $100 for every $1,000 of MAGI over the threshold (lines 8–13).

2) “No Tax on Overtime” (Part III) — Cap: $12,500 single / $25,000 MFJ. Eligibility: only the premium portion of overtime (the “half” in time‑and‑a‑half). Joint filing and SSN requirements apply. Phaseout: starts at $150,000 MAGI ($300,000 MFJ). Formula: after the cap, reduce the result by $100 for every $1,000 of MAGI over the threshold (lines 16–21).

3) “No Tax on Car Loan Interest” (Part IV) — Cap: up to $10,000 per year. Eligibility: interest on loans originated after Dec. 31, 2024, for a personal‑use vehicle (not business), original use by the taxpayer, secured by a lien, and final assembly in the United States with GVWR under 14,000 lbs. VIN reporting required. Phaseout: starts at $100,000 MAGI ($200,000 MFJ). Formula: after the cap, reduce the result by $200 for every $1,000 over the threshold (lines 25–30).

4) “Enhanced Deduction for Seniors” (Part V) — Amount: $6,000 per eligible individual age 65+ (i.e., $12,000 if both spouses qualify). Phaseout: starts at $75,000 MAGI ($150,000 MFJ). Formula: multiply excess MAGI over the threshold by 6%, then subtract that amount from $6,000 (lines 31–35).

Where it lands on your Form 1040

Schedule 1‑A adds the four results and carries the total to Form 1040 line 13b (or line 13c on Form 1040‑NR). That amount reduces your income before tax is computed—these are deductions, not credits.

Draft status and OMB approval

All materials linked here are drafts and “DRAFT—NOT FOR FILING.” IRS drafts can change and must receive OMB approval before final release. Expect minor edits to line numbers or instructions.

What to do now

How Archer Lewis can help

Archer Lewis can help you navigate Draft Schedule 1-A from start to finish—calculating MAGI, modeling phaseouts, and documenting each deduction correctly. We’ll verify eligibility for “No Tax on Tips” and “No Tax on Overtime” (including 2025 transition reporting and 2026 W-2 code updates), confirm vehicle loan/VIN requirements for the car-interest deduction, apply the $6,000 senior deduction where it fits, and ensure your totals flow cleanly to Form 1040 line 13b. If you’d like, we’ll coordinate with payroll, set up a simple record-keeping checklist, and file your return accurately and on time. Reach out to Archer Lewis to get started.