How to Fill Out Schedule 1-A: A Step-by-Step Guide for Tipped Workers

If you're a tipped worker filing your 2025 taxes, there's a new form you need to know about: Schedule 1-A. It's the IRS form for claiming the Qualified Tips Deduction under the No Tax on Tips law — and it could save you thousands of dollars.

Here's a step-by-step guide to filling it out.

What Is Schedule 1-A?

Schedule 1-A is a new IRS form created by the One Big Beautiful Bill Act (OBBBA). It's where you calculate and claim the tip deduction. You file it as an attachment to your regular Form 1040.

A few key things to know upfront:

You can claim this whether you itemize or take the standard deduction. It's an above-the-line deduction, meaning it reduces your adjusted gross income directly.
The maximum deduction is $25,000 in qualified tips per year.
You don't need a special tax preparer. The form is straightforward, and most tax software will support it for the 2025 filing year.

Before You Start: Gather Your Numbers

To fill out Schedule 1-A, you need three things:

1. Your Total Qualified Tips

This is the total amount of voluntary tips you received during the tax year. It includes:

Cash tips
Credit card and debit card tips
Tips from tip-sharing or tip-pooling arrangements

It does not include auto-gratuities or mandatory service charges.

2. Your W-2 Information

Look at your W-2 from each tipped employer:

Box 1: Total wages, tips, and other compensation
Box 7: Social Security tips — this is a useful reference point, but it may include non-qualified amounts
Box 8: Allocated tips (if applicable)

3. Your Modified Adjusted Gross Income (MAGI)

You need your MAGI to check for the income phaseout. For most tipped workers, your MAGI is the same as your adjusted gross income (AGI) on line 11 of Form 1040.

Why 2025 Is Tricky

Here's the catch with the 2025 tax year: employers were not required to separately report qualified tips on your W-2. The separate reporting requirement starts in 2026.

That means for 2025, your W-2 might lump everything together — voluntary tips, auto-gratuities, service charges — all in one number. It's on you to separate them.

This is why keeping a daily tip log is so important. If you tracked your tips throughout 2025, you're in great shape. If you didn't, here are some ways to reconstruct your numbers:

Credit card tip records: Your employer can usually provide a breakdown of credit card tips paid to you.
Pay stubs: Many employers show tip amounts on each pay stub.
Bank deposits: If you deposited cash tips regularly, your bank statements can help estimate your totals.
The IRS reasonable estimate: If you have no records, the IRS allows you to use a reasonable estimate. But "reasonable" means you should be able to explain how you arrived at the number.

Starting in 2026, your employer will report qualified vs. non-qualified tips separately on your W-2, making this much simpler going forward.

Step-by-Step: Filling Out Schedule 1-A

Line 1: Qualified Tips

Enter the total amount of qualified tips you received during the tax year. Remember — only voluntary tips from a qualifying occupation count. If you work multiple tipped jobs, add them all together here.

Line 2: Tip Deduction Cap

Enter $25,000. This is the maximum deduction allowed by law.

Line 3: Tentative Deduction

Enter the lesser of Line 1 or Line 2. If your tips were $20,000, enter $20,000. If your tips were $30,000, enter $25,000 (the cap).

Line 4: Income Phaseout

This is where you check if your income reduces your deduction.

If your MAGI is under $150,000 (single/HoH) or $300,000 (married filing jointly), enter $0. Your deduction is not reduced.
If your MAGI exceeds the threshold, calculate the reduction: for every $1,000 over the threshold, reduce by $100.

Example: Single filer, MAGI of $165,000.

Excess: $165,000 − $150,000 = $15,000
Reduction: ($15,000 ÷ $1,000) × $100 = $1,500
Enter $1,500 on Line 4.

Not sure about your phaseout? Use our calculator to see your exact numbers.

Line 5: Qualified Tips Deduction

Subtract Line 4 from Line 3. This is your actual deduction. Transfer this amount to the designated line on Form 1040 Schedule 1.

Common Mistakes to Avoid

Including auto-gratuities. That 18% charge on large parties? It's a service charge, not a tip. Don't include it.

Forgetting about tip pooling. If your employer uses a tip pool, the tips you received from the pool ARE qualified — as long as the original tips were voluntary.

Double-counting. If you work two tipped jobs, combine your tips but make sure you're not counting the same income twice (e.g., if one W-2 already includes pooled tips from both roles).

Ignoring the phaseout. If you have a high-earning spouse and file jointly, your combined MAGI could push you into phaseout territory. Run the numbers with your joint income.

Not keeping records. The IRS can ask you to substantiate your tip amounts. A daily tip log (even a simple spreadsheet) is your best protection.

How Untaxed Helps

Untaxed is designed to make this entire process painless:

Track tips daily — log cash and credit card tips as you earn them
Automatic separation — Untaxed flags auto-gratuities and service charges separately
Schedule 1-A export — generate a report formatted for the form, with all the numbers pre-calculated
IRS-compliant tip log — if you're ever audited, Untaxed produces a log that meets IRS documentation standards

What if I Already Filed Without the Deduction?

If you filed your 2025 taxes before you knew about the tip deduction, you can still claim it. File Form 1040-X (Amended U.S. Individual Income Tax Return) with Schedule 1-A attached. The IRS generally allows amended returns within three years of the original filing deadline.

Next Steps

Check if your occupation qualifies →
Calculate how much you'll save →
Gather your W-2s and tip records
Fill out Schedule 1-A and file with your 1040 (or amend if you already filed)