Starting with the 2026 tax year, the IRS will introduce a new form — Schedule 1-A — to capture several expanded deductions approved in the One Big Beautiful Bill Act (OBBA) that many taxpayers might overlook or might not claim. This new schedule allows individuals under certain income thresholds to report and deduct:

  • Tips received from employers (verified through payroll records or Form W-2) – In 2026 (tax year 2025), the employer should communicate the qualified tips as the w2 form might not be updated in time.
  • Overtime pay that qualifies under the new income-based deduction limits
  • Car loan interest paid on eligible vehicles used for work or personal purposes, subject to caps and substantiation
  • Enhanced senior deductions for taxpayers age 65 and older

To take advantage of these new deductions:

  • Keep detailed records — including paystubs showing tips and overtime, and auto-loan statements listing interest paid (we hope a car loan form might be released by car financing companies).
  • Coordinate with your employer — confirm that tips and overtime are properly reported in your year-end W-2 or other type of supporting documentation.
  • File using the new schedule — Schedule 1-A will flow directly into Form 1040 to claim those deductions.

As the IRS finalizes the 2026 forms, taxpayers and employers alike should update their recordkeeping systems to capture these amounts throughout the year — not just at tax time. At GG CPA Services, we are already updating our Tax organizer to include these additional deductions. We want to make sure that business owners and employees stay compliant and maximize every eligible deduction. If you have questions on this new Schedule inside the 1040 personal tax return, reach out to our team.  

Link IRS – Schedule 1-A form

Link Journal of Accountancy – IRS releases draft form for tip, overtime, car loan, and senior deductions

Link Journal of Accountancy – AICPA seeks IRS guidance on tip, overtime tax deductions for 2025

Link Journal of Accountancy – IRS offers relief on car loan interest reporting under H.R. 1