Hoping to claim the new $6,000 additional deduction for seniors, or the new deductions for tip income, overtime income, or car loan interest? You can now see how these deductions will appear on your tax return.

When the One Big Beautiful Bill Act (OBBBA), otherwise known as P.L. 119-21, was passed and signed into law on July 4, 2025, it introduced the following new tax provisions:

  • No tax on tips – Now Internal Revenue Code 224
  • No tax on overtime – Now Internal Revenue Code 225
  • No tax on car loan interest – Now Internal Revenue Codes 163(h)(4) and 63(b)(7)

It also introduced an additional deduction of $6,000 for seniors.

Since these provisions did not previously exist, the IRS created an new form, Schedule 1-A, to enable taxpayers to take advantage of the OBBBA provisions. The form has yet to be finalized, but it gives a good indication of what you’ll need to do to claim the OBBBA deductions.

What does Schedule 1-A include?

The form is subdivided into six parts. Below, we give a summary of each section.

Part I – Modified Adjusted Gross Income (MAGI) Amount

To qualify for most of the OBBBA deductions, your income, specifically your “modified adjusted gross income (MAGI),” must be below certain thresholds. So, Part 1 of Schedule 1-A focuses on your MAGI.

Since MAGI is not a term many people understand or know how to calculate, we previously posted a 2-part blog dedicated to MAGI for the OBBBA credits:

Part I of Schedule 1-A takes the various subtotals of items in the MAGI calculation and computes your MAGI for OBBBA deduction purposes.

Part II – No Tax on Tips

Part II, No Tax on Tips, covers some of the requirements to qualify for the deduction of certain tip income, including:

  • You must have a valid social security number.
  • If married, you must file jointly to claim the deduction. This deduction is not available for married taxpayers filing separately.
  • Your MAGI must be below $150,000 (or $300,000, if married filing jointly) to qualify for the full deduction. If your income is above that level, you may qualify for a partial deduction, as explained in Part 2 of our MAGI blog post.

This part also compiles your qualified tip income, as reported on IRS Forms W-2, 4137, and/or 1099 (either 1099-MISC, 1099-NEC, or 1099-K).

The Treasury Department has released a list of 68 professions that are occupations that allow qualified tip income. In addition, the IRS released proposed regulations related to this new tax law on September 26, 2025.

Part III – No Tax on Overtime

Part III, No Tax on Overtime, covers some of the requirements to qualify for the deduction of overtime income, including:

  • You must have a valid social security number.
  • If married, you must file jointly to claim the deduction. This deduction is not available for married taxpayers filing separately.
  • Your MAGI must be below $150,000 (or $300,000, if married filing jointly) to qualify for the full deduction. If your income is above that level, you may qualify for a partial deduction.

This part also compiles your qualified overtime income, as reported on IRS Forms W-2, 1099-MISC, and 1099-NEC.

Part IV – No Tax on Car Loan Interest

Part IV, No Tax on Car Loan Interest:

  • Requests the “Vehicle Identification Number” (VIN) of the qualified passenger vehicle that you purchased
  • Deducts any car loan interest amounts already claimed on other parts of your tax return (for example, as a deduction under Schedule C, Self-Employment Income, or Schedule E, Rental Income)
  • Reports the remaining amount of qualified car loan interest that is eligible for the OBBBA deduction
  • Calculates how much of a deduction you are eligible for based on your MAGI

The IRS has not yet specified what type of form taxpayers will receive to report their “paid or accrued qualified passenger vehicle loan interest.” OBBBA indicates that auto loan dealers will be subject to the information reporting requirements under IRC 6050AA. This means that the report provided to taxpayers will likely look similar to IRS Form 1098 for mortgage interest.

Part V – Enhanced Deduction for Seniors

In Part V, Enhanced Deduction for Seniors, calculates whether seniors qualify for an additional deduction of up to $6,000. This “additional” senior deduction is a benefit provided under OBBB3 as an alternative to the request for “no tax on social security.”

Part V covers some of the requirements to qualify for the enhanced senior deduction, including:

  • You must have a valid social security number.
  • You must turn 65 before the end of the taxable year.
  • Your MAGI must be below $75,000 (or $150,000, if married filing jointly) to qualify for the full enhanced deduction. If your income is above that level, you may qualify for a partial deduction.

Part VI – Total Additional Deductions

Part VI, Total Additional Deductions, totals the available deductions from all parts of Schedule 1-A, for inclusion on a new line, Line 13(b), on Form 1040, Page 1. The deductions then reduce adjusted gross income in the overall calculation of your taxable income.

 

Since 1983, The Wolf Group has been helping clients take advantage of new tax opportunities in order to minimize their overall tax liability. We also seek to educate clients on new developments so they can assess how changes in tax laws will affect them. If you have questions related to your specific situation—or about tax-planning strategies you can employ around the new OBBBA provisions—feel free to contact us.

Pursuant to Circular 230, promulgated by the Internal Revenue Service, any US tax advice contained in the body of this writing is not intended or written to be used, and cannot and should not be used, by any recipients as specific tax advice related to their facts and circumstances. Taxpayers should consult their local tax professional and/or attorney to obtain specific tax advice related to their facts and circumstances.