Schedule 1-A Walkthrough: Claiming Tips, Overtime, and the Senior Deduction in 2026

Tax year 2026 introduces Schedule 1-A, a new IRS form created specifically for the three above-the-line deductions enacted by the One Big Beautiful Bill Act (OBBBA). If you earn tips, work overtime, or are 65 or older, this form is how you claim those deductions. Below is a step-by-step walkthrough of every part of the form, followed by a worked example that combines all three deductions.

What is Schedule 1-A?

Schedule 1-A is an attachment to Schedule 1 (Additional Income and Adjustments to Income). It has three parts, one for each OBBBA deduction:

• Part I: Qualified Tips Deduction (IRC Section 224)
• Part II: Qualified Overtime Deduction (IRC Section 225)
• Part III: Senior Bonus Deduction (OBBBA Section 70103)

You complete only the parts that apply to you. The total from all three parts flows to Schedule 1, Line 26, and then to Form 1040, Line 10, reducing your adjusted gross income. These deductions are above the line, which means they reduce AGI regardless of whether you itemize or take the standard deduction.

Part I: Qualified tips deduction

Part I is for W-2 employees in customarily tipped occupations. The key input comes from your W-2 Box 12, Code TP, which shows the dollar amount of your qualified tips for the year. Starting TY 2026, employers must use this code.

Fill in Part I as follows:

1. Line 1: Enter your qualified tip amount from W-2 Code TP. If you have multiple W-2s with Code TP, add them together.
2. Line 2: Enter the cap of $25,000.
3. Line 3: Enter the lesser of Line 1 or Line 2.
4. Line 4: If your MAGI exceeds the phase-out threshold ($150,000 single / $300,000 MFJ), calculate the reduction at 10% of the excess and enter it here. Otherwise, enter $0.
5. Line 5: Subtract Line 4 from Line 3. This is your tips deduction (cannot be below $0).

Independent contractors (1099-NEC) and self-employed workers do not qualify for Part I. The deduction also does not apply to mandatory service charges distributed as wages.

Part II: Overtime premium deduction

Part II covers the overtime premium deduction for FLSA-covered employees. Your W-2 Box 12, Code TT, shows the qualifying overtime premium amount. Note that only the premium portion of overtime pay qualifies. For time-and-a-half, the premium is the extra 0.5x above the regular rate. The base rate portion of overtime hours is not deductible.

1. Line 6: Enter your qualified overtime premium from W-2 Code TT. Combine amounts from multiple W-2s if applicable.
2. Line 7: Enter the cap. For single and head of household filers, this is $12,500. For married filing jointly, it is $25,000 (combined for both spouses).
3. Line 8: Enter the lesser of Line 6 or Line 7.
4. Line 9: Calculate the MAGI phase-out reduction if applicable (same thresholds and 10% rate as the tips deduction). Enter the reduction amount.
5. Line 10: Subtract Line 9 from Line 8. This is your overtime deduction (cannot be below $0).

Salaried employees exempt from FLSA overtime requirements generally do not qualify, because their employer will not report Code TT amounts. For more detail, see the overtime deduction for salaried employees guide.

Part III: Senior bonus deduction

Part III is for taxpayers who are age 65 or older by the end of the tax year. Unlike the tips and overtime deductions, the senior bonus does not depend on a W-2 code. It is a flat $6,000 deduction per qualifying individual.

1. Line 11: Enter $6,000 if you are age 65 or older as of December 31, 2026. If both spouses qualify on an MFJ return, enter $12,000 ($6,000 each).
2. Line 12: Calculate the senior bonus phase-out if your MAGI exceeds $75,000 (single) or $150,000 (MFJ). The reduction rate is 6% of the excess.
3. Line 13: Subtract Line 12 from Line 11. This is your senior bonus deduction (cannot be below $0).

The senior bonus deduction is separate from the additional standard deduction for age 65+. Both can be claimed. A qualifying single filer receives the $16,100 standard deduction, plus the additional standard deduction for age, plus up to $6,000 from Part III.

How it flows to Form 1040

Once you complete the applicable parts of Schedule 1-A, the total moves through two more forms:

1. Schedule 1-A total (Part I Line 5 + Part II Line 10 + Part III Line 13)
2. Schedule 1, Line 26: Enter the Schedule 1-A total here, alongside any other above-the-line adjustments on Schedule 1.
3. Form 1040, Line 10: The Schedule 1 adjustments total is entered here, reducing your AGI.

The deductions reduce AGI before the standard deduction or itemized deductions are applied. A lower AGI can also help with other tax benefits that phase out based on income levels.

Worked example: all three deductions

Consider Rosa, a 67-year-old restaurant server filing as single. During 2026, she earned $35,000 in base wages, $20,000 in qualified tips (reported as W-2 Code TP), and $5,000 in overtime premium (reported as W-2 Code TT). Her total W-2 income is $60,000, and her MAGI is also $60,000.

Rosa also qualifies for the additional standard deduction for being over 65, which further reduces her taxable income. The Schedule 1-A deduction calculator can model your own scenario with all three deductions.

Common mistakes to avoid

Based on the structure of Schedule 1-A, several errors are likely in the first year of filing:

• Using total overtime pay instead of the premium: Code TT should report only the premium portion. If your employer reported the full overtime wage (including the base rate), the W-2 is incorrect. Request a corrected W-2 before filing.
• Confusing the senior bonus with the additional standard deduction: The $6,000 OBBBA senior bonus deduction is claimed on Schedule 1-A, not on page 1 of Form 1040 where the additional standard deduction appears. These are two different tax benefits and you can claim both.
• Applying the wrong phase-out to the senior bonus: The senior bonus uses different thresholds ($75,000 single / $150,000 MFJ) and a different rate (6%) than the tips and overtime deductions ($150,000 / $300,000 at 10%).
• Filing MFS and claiming OBBBA deductions: Married Filing Separately filers cannot claim any of the three OBBBA deductions. If you file MFS and complete Schedule 1-A, the IRS will deny the deductions.
• Missing W-2 codes: If your W-2 lacks Code TP or Code TT, you cannot simply estimate the amounts. Starting TY 2026, these codes are required. Contact your employer for a corrected W-2 (Form W-2c).

Use the no tax on tips calculator and the overtime deduction calculator to verify your amounts before completing Schedule 1-A. The Schedule 1-A glossary entry provides additional background on the form's structure and filing requirements.