Schedule 1-A Glossary

Schedule 1-A

The IRS form, attached to Form 1040, used for tax years 2025–2028 to claim the deductions for qualified tips, qualified overtime, car loan interest and seniors. The total flows to Form 1040 line 13b.

Below-the-line deduction

A deduction subtracted after adjusted gross income. The four Schedule 1-A deductions are below the line, so they reduce taxable income but not AGI.

Modified adjusted gross income (MAGI)

For Schedule 1-A, AGI plus excluded foreign earned income and housing amounts (Form 2555) and excluded income from Puerto Rico or American Samoa. Every phase-out uses it.

Qualified tip

A voluntary cash or charged amount the customer chooses to pay, not a required service charge, received in a listed tipped occupation and reported on a W-2, 1099 or Form 4137.

Service charge

An amount the business requires, such as an automatic large-party gratuity. Not a qualified tip even if it is passed to the worker.

Tipped occupation list

The Treasury list of occupations that customarily and regularly received tips before 2025, in eight groups with three-digit codes, published in final regulations.

Specified service trade or business (SSTB)

Fields such as health, law, accounting, performing arts, consulting, athletics and financial services. Tips received in an SSTB do not qualify.

Form 4137

The form used to report tips you did not report to your employer and figure Social Security and Medicare tax on them.

FLSA

The Fair Labor Standards Act, the federal law that requires time-and-a-half pay for non-exempt employees for hours over 40 in a workweek.

Qualified overtime compensation

The portion of overtime pay above the regular rate that section 7 of the FLSA requires — the "half" in time-and-a-half.

Regular rate

The FLSA hourly rate used for overtime, which includes most nondiscretionary bonuses and shift differentials, not only base pay.

Exempt employee

An employee not entitled to FLSA overtime, such as many salaried executive, administrative and professional workers. Has no qualified overtime.

Final assembly

The process at the plant where the vehicle is completed. For the car loan deduction it must be in the United States; check the vehicle label or the NHTSA VIN decoder.

GVWR

Gross vehicle weight rating, the maximum loaded weight set by the manufacturer. Must be under 14,000 pounds for the car loan deduction.

VIN

Vehicle identification number, a 17-character code that must be entered on the return for the car loan deduction.

Additional standard deduction

The long-standing extra standard deduction for age 65 or blindness: $1,650 per qualifying married person or $2,050 for unmarried filers in 2026. Separate from the $6,000 senior deduction.

Phase-out

A reduction of a deduction as MAGI rises above a threshold. Tips and overtime: $100 per full $1,000. Car loan: $200 per $1,000 or part. Senior: 6% of the excess.

Valid SSN

A Social Security number valid for employment, required for the tips, overtime and senior deductions (and for a spouse on a joint return).

See the Schedule 1-A walkthrough and the phase-out guide for how these terms work together.