Schedule 1-A Deduction Calculator 2026: Combined Tips & Overtime OBBBA Deductions
Schedule 1-A is the new OBBBA deductions form where you claim both the qualified tips deduction (IRC §224, up to $25,000 per year) and the qualified overtime deduction (IRC §225, up to $12,500 single / $25,000 MFJ). Both are above-the-line deductions that reduce your federal taxable income even if you take the standard deduction. The same MAGI phase-out applies to both: the caps are reduced by 10% of MAGI above $150,000(single/HoH) or $300,000 (MFJ). FICA taxes still apply to all tips and overtime wages, Social Security (6.2%) and Medicare (1.45%) are not reduced by these deductions. MFS filers are not eligible for either deduction.
How Schedule 1-A Works
Schedule 1-A combines both OBBBA income tax deductions into a single form. You calculate each deduction independently, then report the combined total as an above-the-line adjustment to income.
Tips Deduction (IRC §224)
- Cap: $25,000 per taxpayer per year
- Eligible income: Qualified tips from customarily tipped occupations (IRC §45B)
- W-2 code: Box 12, Code TP
Overtime Deduction (IRC §225)
- Cap: $12,500 (single/HoH) / $25,000 (MFJ)
- Eligible income: Only the premium portion of overtime pay, for time-and-a-half, that's the 0.5× above regular rate
- W-2 code: Box 12, Code TT
Shared Phase-Out
The same MAGI phase-out applies to both deductions. Each cap is independently reduced by 10% of MAGI above $150,000 (single/HoH) or $300,000 (MFJ). For every $1,000 of excess MAGI, each cap drops by $100. This means a worker with both deductions loses $200 in total cap space per $1,000 of excess MAGI.
FICA Still Applies
These deductions reduce federal income tax only. FICA taxes (Social Security at 6.2% and Medicare at1.45%) continue to apply to all tips and overtime wages. State income taxes may also still apply depending on your state.
MFS Exclusion
Married Filing Separately filers are completely ineligible for both deductions. Both IRC §224 and §225 require married taxpayers to file jointly.
Worked Examples
Example 1: Server, Tips + Overtime, MAGI $80,000
Profile: $15,000 qualified tips, $25/hr regular rate, 200 OT hours (1.5×), single filer, MAGI $80,000
Qualified tips: $15,000
Tips cap: $25,000
MAGI $80,000 < $150,000, no phase-out
Tips deduction: $15,000
Overtime:
Premium: $25.00 × (1.5 − 1.0) × 200 = $2,500.00
OT cap: $12,500
MAGI $80,000 < $150,000, no phase-out
Overtime deduction: $2,500.00
Combined Schedule 1-A deduction: $17,500
Example 2: Delivery Driver, Tips + Overtime, MAGI $55,000
Profile: $20,000 qualified tips, $18/hr regular rate, 400 OT hours (1.5×), single filer, MAGI $55,000
Qualified tips: $20,000
Tips cap: $25,000
MAGI $55,000 < $150,000, no phase-out
Tips deduction: $20,000
Overtime:
Premium: $18.00 × (1.5 − 1.0) × 400 = $3,600.00
OT cap: $12,500
MAGI $55,000 < $150,000, no phase-out
Overtime deduction: $3,600.00
Combined Schedule 1-A deduction: $23,600
Example 3: Nurse (No Tips), Overtime Only, MAGI $120,000 MFJ
Profile: $0 tips, $35/hr regular rate, 600 OT hours (1.5×), MFJ, MAGI $120,000
Qualified tips: $0: no tips deduction
Tips deduction: $0
Overtime:
Premium: $35.00 × (1.5 − 1.0) × 600 = $10,500.00
OT cap (MFJ): $25,000
MAGI $120,000 < $300,000 MFJ threshold, no phase-out
Overtime deduction: $10,500.00
Combined Schedule 1-A deduction: $10,500