1040 Schedule 1A

From Bob Jennings at TaxSpeaker. Check out more at taxspeaker.com

The One Big Beautiful Bill Act (OBBBA), Public Law 119-21, signed July 4, 2025, created four new above-the-line deductions for individual taxpayers, effective for tax years beginning after December 31, 2024, and expiring after December 31, 2028. Congress codified these deductions in new Internal Revenue Code sections §224 (qualified tips), §225 (qualified overtime), and new provisions under §163(h)(4) (vehicle loan interest) and §222A (senior deduction). To consolidate these deductions on a single schedule, the IRS created Schedule 1-A, Additional Deductions, which is attached to Form 1040. The total from Schedule 1-A flows to Form 1040, Line 13b and reduces taxable income — but does NOT reduce adjusted gross income (AGI). These deductions are available whether the taxpayer itemizes or takes the standard deduction. The IRS published Schedule 1-A and its instructions (IR-2026-28, March 2, 2026) for use in the 2027 filing season (tax year 2026 returns). 

Critical point: These deductions reduce TAXABLE INCOME (not AGI). For purposes of determining eligibility and phaseout thresholds, the relevant income measure is Modified Adjusted Gross Income (MAGI) — computed in Part I of Schedule 1-A — which adds back certain excluded income. Specifically, MAGI for Schedule 1-A includes: (1) AGI from Form 1040 line 11b; (2) Puerto Rico-excluded income; (3) Foreign earned income and housing excluded under §911 (Form 2555, lines 45 and 50); and (4) Income excluded under §933 (Form 4563, line 15). This is a significant trap for expatriates: a taxpayer who excludes $132,900 of foreign earned income under §911 will have that amount added back to compute MAGI for Schedule 1-A purposes, potentially phasing out one or more of the four deductions.