Tax Planning
How to Claim Your Overtime, Tip, and Car Loan Deductions in 2025—OBBB’s New Forms
A new Schedule 1-A and updated Form 1040 instructions clarify how everyday workers can claim new deductions for overtime, tips, car loans, and senior enhanced deductions.
By NomadicTax Research Team • 5-8 min read • March 7, 2026
## Overview: Schedule 1-A & OBBB Provisions
For tax year 2025, the IRS published **Schedule 1-A** and updated instructions to **Form 1040** to implement critical portions of the One, Big, Beautiful Bill. These instructions detail how taxpayers can claim deductions for:
- Qualified tips (deductions for tips commonly and regularly received in certain occupations) ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai))
- Qualified overtime pay (the portion of overtime that exceeds the regular rate) ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai))
- Interest paid on qualified car loans for eligible passenger vehicles ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai))
- Enhanced deduction for seniors (born before January 2, 1961), with phaseouts based on Modified Adjusted Gross Income (MAGI) ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai))
## What You Need to Know to Claim Them
### 1. Qualified Tips
- Tips must be received in an occupation listed under “customarily and regularly receive tips.”
- There are worksheets and occupation codes included in the instructions to help you determine eligibility and amount.
- You must report tips; payers don’t need to update W-2 or 1099 forms for 2025 but should provide info to taxpayers. ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai))
### 2. Qualified Overtime Compensation
- Only the “premium” (e.g., the half-time portion of time-and-a-half) counts.
- Maximum deduction: \$12,500 for individuals, \$25,000 if married filing jointly.
- Phases out above MAGI of \$150,000 (individual) or \$300,000 (joint).
- If employer doesn’t separately report overtime premium, you may use a reasonable method to derive it using pay stubs or statements. ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai))
### 3. Car Loan Interest Deduction
- Deduct interest on a **qualified passenger vehicle loan** used for personal use, not lease payments.
- Must meet criteria (vehicle assembled in U.S., personal use, etc.).
- Applies whether you itemize or use standard deduction. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
### 4. Seniors’ Enhanced Deduction
- For taxpayers born before Jan 2, 1961.
- If married filing jointly, both spouses must qualify.
- Enhanced deduction up to \$6,000 per eligible person, phases out above certain MAGI thresholds. ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai))
## Actionable Steps for Taxpayers
- Gather all documents: pay stubs showing overtime, tip statements, loan interest payment statements.
- Use Schedule 1-A and new Form 1040 instructions. Multiple worksheets are provided for tips and overtime. ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai))
- Check your MAGI early to estimate phaseout impacts.
- Keep good records even if forms aren’t updated for 2025—IRS allows alternative documentation where necessary. ([irs.gov](https://www.irs.gov/irb/2025-50_IRB?utm_source=openai))
## Example Scenario
> Maria, a restaurant worker, earned \$18,000 in tips in 2025. Her MAGI is \$80,000. Since her occupation is listed, she can deduct up to \$18,000 in qualified tips using Schedule 1-A—even if her employer didn’t mark them on W-2s separately—by using her pay statements and worksheets. If married filing jointly and both MAGI under \$300,000, similar deductions apply.
**Takeaway**: Even without updated forms, taxpayers can nevertheless access new OBBB benefits in 2025 using Schedule 1-A—with careful recordkeeping and by following the new guidance to claim deductions properly.