Four new deductions hit the 2025 tax year and most filers have no idea they exist. Schedule 1-A covers tip income, overtime pay, car loan interest on U.S.-assembled vehicles, and an enhanced deduction for seniors. All four are above-the-line, meaning you claim them whether or not you itemize. For a server pulling $20,000 in tips, that could mean $3,000 back. For someone who financed a new truck last year, up to $10,000 in loan interest is deductible.

The catch: not every tax platform handles all four deductions equally. Some nail it. Some cover two out of four and call it done. With IRS Direct File gone for 2026 after the DOGE-driven shutdown, you’re picking from commercial software or IRS Free File partners. Here’s which ones actually do the job.

Quick Verdict

TurboTax Free — Tips: Yes | Overtime: Yes | Car Loan Interest: Yes | Senior Deduction: Yes | Free Tier Covers 1-A: Yes

H&R Block Free — Tips: Yes | Overtime: Yes | Car Loan Interest: Yes | Senior Deduction: Yes | Free Tier Covers 1-A: Yes

FreeTaxUSA — Tips: Yes | Overtime: Yes | Car Loan Interest: Yes | Senior Deduction: Yes | Free Tier Covers 1-A: Yes ($14.99 state)

TaxSlayer — Tips: Yes | Overtime: Yes | Car Loan Interest: Yes | Senior Deduction: Yes | Free Tier Covers 1-A: Partially

Cash App Taxes — Tips: Yes | Overtime: Yes | Car Loan Interest: Yes | Senior Deduction: Yes | Free Tier Covers 1-A: Yes

TaxAct — Tips: Partial | Overtime: Paid only | Car Loan Interest: Paid only | Senior Deduction: Paid only | Free Tier Covers 1-A: No

Best overall: TurboTax Free (broadest coverage, automatic detection, no cost for W-2 filers) Best guidance for manual calculations: FreeTaxUSA (built-in calculators, explains Box 14 gaps) Best for seniors: H&R Block Free (clear walkthrough of the $6,000 enhanced deduction) Skip: TaxAct Free (pushes you to paid for overtime and car loan deductions)

The Four Schedule 1-A Deductions, Explained

Schedule 1-A came out of the Tax Relief for American Workers Act of 2025. The IRS published final guidance in December 2025, giving software companies about two months to build support before filing season opened in late January. That timeline matters because some platforms rushed their implementation and it shows.

Here’s what each deduction covers:

Tips (up to $25,000 single / $37,500 joint). W-2 tip workers can deduct qualifying tip income. That includes servers, bartenders, hotel staff, salon workers, valets, and anyone whose tips show up in Box 8 or Box 7 of their W-2. The deduction is capped at $25,000 for single filers and $37,500 married filing jointly.

Overtime (up to $12,500 single / $25,000 joint). One-third of qualified overtime pay is deductible. Work $36,000 in overtime as a single filer: deduct $12,000. The cap is $12,500 single, $25,000 joint. The problem? Most W-2s don’t break out overtime separately. You often need your pay stubs to calculate the number yourself.

Car loan interest (up to $10,000). Interest paid on a new vehicle loan qualifies if the vehicle was assembled in the United States. This is a brand-new deduction category with no prior equivalent. The cap is $10,000 regardless of filing status. Income phaseouts start at $100,000 single / $200,000 joint.

Enhanced senior deduction ($6,000). Taxpayers aged 65 and older get an additional $6,000 above-the-line deduction. This stacks on top of the existing higher standard deduction for seniors. It’s the simplest of the four to claim, yet several platforms bury it.

Income phaseouts to watch: Tips and overtime deductions begin phasing out at $150,000 AGI for single filers and $300,000 for joint filers. Car loan interest phases out earlier, at $100,000 / $200,000. If you’re near those thresholds, the software should calculate the reduced amount automatically. Most do. TaxAct doesn’t in its free tier.

TurboTax Free: Broadest Automatic Coverage

TurboTax’s free edition handles all four Schedule 1-A deductions without pushing you to a paid plan. That’s the headline.

The tip deduction triggers automatically when your W-2 has Box 8 (allocated tips) populated. Import your W-2 electronically, and TurboTax catches it without you doing anything extra. If you enter your W-2 manually, you need to know to fill in Box 8 yourself, which is less obvious but still free.

Overtime follows a similar pattern. TurboTax asks during the income interview whether you received overtime pay. Enter the total, and it calculates the one-third deduction. What it won’t do: explain how to figure out your overtime total if your employer didn’t code it in Box 14. You’re expected to have the number ready.

Car loan interest is where TurboTax added something genuinely useful. The interview asks about vehicle loans, verifies the vehicle was assembled domestically (it references the NHTSA VIN decoder for checking), and walks through the interest calculation. For a new deduction category with zero prior-year precedent, the implementation is solid.

The senior deduction appears automatically once you confirm your date of birth and age. No hunting required.

Who it’s best for: W-2 earners who want everything handled in one place with no cost. If your W-2 data is clean and your employer coded tips and overtime properly, TurboTax Free is the path of least resistance.

The gap: Overtime workers whose W-2 doesn’t show OT in Box 14 get a blank field and a link to a help article. No calculator. No step-by-step from pay stubs. FreeTaxUSA does this better.

H&R Block Free: Best for Seniors

H&R Block’s free tier covers Form 1040 plus all four Schedule 1-A deductions. The implementation is clean and the senior deduction walkthrough is the best we tested.

For tips and overtime, H&R Block follows the same model as TurboTax: detect from W-2 data, ask follow-up questions, calculate the deduction. The auto loan interest section works similarly, with a question about U.S. assembly and a field for total interest paid.

Where H&R Block stands out is the $6,000 senior deduction. The interview includes a dedicated screen explaining that this is new for 2025, separate from the existing senior standard deduction increase. It calculates the combined benefit (standard deduction + senior increase + Schedule 1-A $6,000) so you can see the total impact in one place. For a 67-year-old single filer, that combined package is substantial, and H&R Block makes the math visible.

The limitation is the same one flagged in our earlier Schedule 1-A software comparison: H&R Block’s free tier doesn’t include AI Tax Assist. If you get stuck calculating overtime from pay stubs, there’s no in-app guidance unless you upgrade to Deluxe ($35). The field just sits there, waiting for a number you may not have.

Who it’s best for: Seniors claiming the enhanced deduction. Tip and overtime workers with clean W-2 data. Anyone who wants H&R Block’s reliability without paying.

The gap: Same overtime calculation blind spot as TurboTax. If Box 14 is empty, you’re on your own.

FreeTaxUSA: Best Guidance for Complex Situations

FreeTaxUSA continues to punch above its weight. Free federal filing, $14.99 for state, and the most helpful Schedule 1-A implementation for filers who don’t have perfect W-2 data.

The overtime section includes a built-in calculator. Enter your hourly OT rate and total overtime hours, and it computes the dollar amount. Or enter a dollar amount directly. It also explains why Box 14 might be empty and how to get your overtime total from your December pay stub or year-end payroll summary. No other free platform walks you through that.

For tips, FreeTaxUSA explains the difference between allocated tips in Box 8 and actual reported tips in Box 7. That distinction matters because the deduction amount can differ depending on which number applies to your situation. We covered the details in our IRS Free File and AI tax tools guide.

Car loan interest is handled with a straightforward questionnaire: vehicle assembly country, loan origination date, total interest paid, AGI for phaseout calculation. FreeTaxUSA also flags when the phaseout reduces your deduction and shows the math.

The senior deduction is present but less prominent than H&R Block’s version. It appears in the correct place in the filing flow but doesn’t get its own dedicated explanation screen.

Who it’s best for: Anyone who needs help with the calculations, not just a blank field. Overtime workers without Box 14 data. Filers with car loans who want to see the phaseout math. People who don’t mind a dated interface in exchange for better accuracy support.

The gap: Interface looks like 2015. State costs $14.99. The senior deduction could be more prominent.

TaxSlayer and Cash App Taxes: Worth Knowing

TaxSlayer built a dedicated “Schedule 1-A” menu covering all four deductions with step-by-step pay stub calculations. The best overtime walkthrough we tested. The catch: its free tier is narrower than TurboTax or H&R Block. Complex returns hit the $24.95 Classic paywall.

Cash App Taxes supports all four deductions with no income limit and no cost. Federal and state, both free. The tradeoff: zero guidance. Fields exist, you enter numbers, and the software computes. If “Box 14” and “allocated tips” don’t mean anything to you, use FreeTaxUSA instead.

TaxAct: The One to Skip for Schedule 1-A

TaxAct’s free tier handles basic tip income from W-2 Box 8 but requires the paid Deluxe plan ($29.99) for overtime, car loan interest, and the senior deduction. That’s a hard recommendation to make when TurboTax, H&R Block, FreeTaxUSA, and Cash App Taxes all handle the same deductions for free.

The paid version works fine. But there’s no reason to pay TaxAct for Schedule 1-A coverage that other platforms include at no cost. Our full TaxAct 2026 review covers what the platform does well (Xpert Full Service, AI scanning), but Schedule 1-A isn’t its strength.

The IRS Direct File Gap

IRS Direct File would have been the obvious free option for Schedule 1-A. Government-built, no upsells, no commercial data use. But the Trump administration shut it down in early 2025 as part of the DOGE efficiency push, and it’s not coming back for the 2026 filing season.

That leaves roughly 4 million former Direct File users looking for alternatives. If you’re one of them: IRS Free File through the portal if your AGI is under $89,000 (the income limit jumped this year), or Cash App Taxes if you’re above it. Both handle Schedule 1-A. Our full guide to free alternatives after Direct File’s elimination has the complete breakdown.

Phaseouts: Who Loses the Deduction

Not everyone gets the full amount. Income phaseouts reduce the deduction as your AGI rises:

Deduction	Single Phaseout Starts	Joint Phaseout Starts
Tips	$150,000	$300,000
Overtime	$150,000	$300,000
Car loan interest	$100,000	$200,000
Senior deduction	No phaseout	No phaseout

The senior deduction has no income limit. Everyone 65+ gets it regardless of income.

For tips and overtime, the phaseout is gradual. A single filer earning $160,000 doesn’t lose the entire deduction; it reduces proportionally. All six platforms we tested calculate phaseouts correctly in their paid tiers. In free tiers, TurboTax, H&R Block, FreeTaxUSA, and Cash App Taxes handle them properly. TaxAct Free does not calculate phaseouts for deductions it locks behind the paywall.

How to Maximize Your Schedule 1-A Deductions

Gather your pay stubs now. If your W-2 doesn’t show overtime in Box 14, request your year-end payroll summary from HR. That single document can be worth $2,000+ in deductions.

Check your car loan paperwork. You need total interest paid in 2025 (your lender sends a 1098 or year-end statement) and confirmation the vehicle was assembled in the U.S. via window sticker or VIN lookup.

Verify your tip reporting. Box 8 shows allocated tips. Box 7 shows social security tips. The amounts may differ, and the deduction amount depends on which applies.

Remember: these stack with the standard deduction. All four are above-the-line. A tip worker claiming $15,000 in tip deductions plus the $15,700 standard deduction gets nearly $31,000 in combined deductions without itemizing a single receipt.

Who Should File Where

Server or bartender with clean W-2 data: TurboTax Free. Automatic tip detection, all four deductions covered, zero cost.

Overtime worker with Box 14 missing: FreeTaxUSA. The built-in calculator and pay stub walkthrough save time and reduce errors. Worth the $14.99 state fee.

Senior taxpayer claiming the $6,000 deduction: H&R Block Free. Clearest explanation of how the new deduction stacks with existing senior benefits.

Anyone who just wants free and fast: Cash App Taxes. All deductions supported, no income limit, no guidance either. Bring your own numbers.

Filer with a new car loan on a U.S.-assembled vehicle: TurboTax Free or FreeTaxUSA. Both handle the VIN verification and phaseout calculation well.

After you file: Once your refund lands, don’t let it evaporate into checking. The best apps for investing or saving your tax refund covers what to do with the money.

The Dollar Math

These deductions add up to real savings for people who qualify:

• A server earning $20,000 in tips saves $2,400-$4,400 depending on tax bracket
• An overtime worker with $30,000 in OT can deduct $10,000, saving $1,200-$2,200
• A car buyer who paid $8,000 in loan interest on a U.S.-assembled truck saves $960-$1,760
• A qualifying senior gets $6,000 off their AGI, saving $720-$1,320
• A 68-year-old bartender who financed a Ford F-150 and worked overtime? All four stack. The combined deduction could exceed $40,000 above-the-line.

The software is free. The deductions are available even if you take the standard deduction. The only cost is the 30-60 minutes it takes to gather your documents and file. For most people in these situations, that’s the highest-ROI hour of the year.

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FAQ

What is Schedule 1-A? Schedule 1-A is a new IRS form for 2025 tax returns that provides above-the-line deductions for tip income (up to $25,000), overtime pay (up to $12,500 single), car loan interest on U.S.-assembled vehicles (up to $10,000), and an enhanced $6,000 deduction for taxpayers 65 and older. You claim these deductions whether or not you itemize.

Does TurboTax Free handle all Schedule 1-A deductions? Yes. TurboTax Free Edition covers all four Schedule 1-A deductions: tips, overtime, car loan interest, and the senior deduction. Tips are detected automatically from W-2 Box 8. The other deductions require you to enter the amounts during the income interview.

What are the income phaseouts for Schedule 1-A? Tips and overtime deductions phase out starting at $150,000 AGI for single filers and $300,000 for joint filers. Car loan interest phases out at $100,000 single / $200,000 joint. The $6,000 senior deduction has no income limit.

Can I claim Schedule 1-A deductions with the standard deduction? Yes. All Schedule 1-A deductions are above-the-line, meaning they reduce your adjusted gross income before the standard deduction is applied. You do not need to itemize to claim them. This is different from traditional itemized deductions like mortgage interest or charitable giving.

Is IRS Direct File available for 2026 filing? No. IRS Direct File was shut down in early 2025 after the DOGE-driven efficiency review. Taxpayers must use commercial software, IRS Free File partners, or a tax professional for the 2026 filing season. See our guide to free alternatives for options.

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Platform features tested March 2026. Schedule 1-A guidance based on IRS final regulations published December 2025. Software updates frequently during filing season. Verify current features and pricing before starting your return. This is general information, not personalized tax advice.