Schedule 1-A calculator: tips, overtime, car-loan interest and the senior deduction
For 2026 returns, four new deductions sit on Schedule 1-A: no tax on tips, no tax on overtime, car-loan interest and an extra deduction for people 65 and older. Enter your numbers to see what you can deduct after the income limits, and roughly how much federal tax it saves.
General information, not tax advice. This estimate follows the IRS Schedule 1-A worksheet with 2026 figures (checked October 15, 2026). Your return may differ; check the IRS sources below or ask a tax professional.
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How each deduction works in 2026
| Deduction | Maximum | Phase-out starts (MAGI) | Reduction |
|---|---|---|---|
| Qualified tips | $25,000 per return | $150,000; $300,000 joint | $100 per full $1,000 over |
| Qualified overtime | $12,500; $25,000 joint | $150,000; $300,000 joint | $100 per full $1,000 over |
| Car-loan interest | $10,000 per return | $100,000; $200,000 joint | $200 per $1,000 or part of $1,000 over |
| Seniors 65+ | $6,000 per person | $75,000; $150,000 joint | 6% of MAGI over |
All four apply for tax years 2025 through 2028 and are claimed on Schedule 1-A, whether you itemize or take the standard deduction. They reduce taxable income, not adjusted gross income, and they do not reduce Social Security or Medicare tax. A valid Social Security number is required for tips, overtime and the senior deduction, and married couples must file jointly to claim those three.
No tax on tips
Tips count only if they were paid voluntarily, in cash or by card, in an occupation on the IRS list of jobs that customarily received tips before 2025. Mandatory service charges do not count, and neither do tips earned in a specified service business such as health, law or financial services, although for now the IRS treats anyone working in a listed tipped occupation as outside that rule. Employees use tips on their W-2 or reported on Form 4137; self-employed workers can count tips only up to the net profit of that business. The $25,000 limit is per return, so it does not double on a joint return.
No tax on overtime
Only the premium part of overtime that the Fair Labor Standards Act requires counts: the extra half of time-and-a-half for hours over 40 in a week. If you earned $15,000 of overtime at time-and-a-half, $5,000 is qualified. Overtime paid above time-and-a-half, holiday or weekend premiums without 40 hours, and overtime owed only under state law do not count.
Car-loan interest
Interest on a loan for a new (not used) car, minivan, van, SUV, pickup or motorcycle under 14,000 pounds counts if the vehicle had final assembly in the United States, the loan was taken out after 2024, it is secured by the vehicle, and the vehicle is used mostly for personal driving. Refinanced loans can qualify up to the old balance. Enter the vehicle's VIN on the form. Shopping for a qualifying loan? Compare auto loan rates on Your Best Loan Rates.
Senior deduction
Each person who is 65 or older by the end of 2026 (born before January 2, 1962) gets $6,000, less 6% of MAGI over $75,000 ($150,000 joint). It is separate from, and on top of, the regular extra standard deduction for age 65 ($2,050 if unmarried, $1,650 per married person in 2026).
Worked example
A single server with $12,000 of qualified tips and modified AGI of $160,500 is $10,500 over the $150,000 threshold. That is 10 full $1,000 steps, so the deduction drops by $1,000 to $11,000. With the $16,100 standard deduction, taxable income falls from $144,400 to $133,400, which saves about $2,640 of federal income tax at the 24% rate.
Frequently asked questions
Do the tips and overtime deductions lower my AGI?
No. Schedule 1-A deductions are taken after adjusted gross income (on Form 1040 line 13b), so they lower taxable income but not AGI. You can take them with the standard deduction; you do not need to itemize.
Are tips and overtime still subject to Social Security and Medicare tax?
Yes. The deductions only reduce federal income tax. Social Security and Medicare taxes are still withheld on tips and overtime, and most states set their own rules.
How much of my overtime counts?
Only the extra "half" of time-and-a-half that the Fair Labor Standards Act requires. If you were paid $15,000 of overtime at time-and-a-half, $5,000 (one third) is qualified overtime. Overtime above time-and-a-half, or paid only under a state law or union contract, does not count.
Can married couples filing separately take these deductions?
Not the tips, overtime or senior deductions: married couples must file jointly for those. The car-loan interest deduction is allowed on a separate return.
Which car loans qualify for the interest deduction?
A loan taken out after December 31, 2024 to buy a new car, SUV, van, pickup or motorcycle under 14,000 pounds that had final assembly in the United States, used mostly for personal driving and secured by the vehicle. Used cars and leases do not qualify, and you must report the VIN.
Who gets the senior deduction?
Anyone with a valid Social Security number who is 65 or older by the end of 2026 (born before January 2, 1962). It is $6,000 per person, so $12,000 when both spouses qualify on a joint return, and it shrinks by 6% of MAGI over $75,000 ($150,000 joint). It is on top of the regular extra standard deduction for age 65.
How long do these deductions last?
Tax years 2025 through 2028. They end after 2028 unless Congress extends them.
Official sources
- IRS Schedule 1-A (Form 1040), Additional Deductions
- IRS Instructions for Form 1040 (Schedule 1-A)
- IRS: Occupations that customarily and regularly received tips
- IRS Rev. Proc. 2025-32 (2026 inflation adjustments)
- NHTSA VIN decoder (plant of manufacture)
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