What is IRS Form 1040 Schedule 1?
Form 1040 Schedule 1 allows you to claim additional sources of income that aren't listed on Form 1040, including unemployment compensation, prize or award money, and gambling winnings. You can also use Schedule 1 to claim certain tax deductions. If you had additional sources of income this year, find out if you need to file a Schedule 1 form.
The One Big Beautiful Bill that passed includes permanently extending tax cuts from the Tax Cuts and Jobs Act, including increasing the cap on the amount of state and local or sales tax and property tax (SALT) that you can deduct, makes cuts to energy credits passed under the Inflation Reduction Act, makes changes to taxes on tips and overtime for certain workers, reforms Medicaid, increases the Debt ceiling, and reforms Pell Grants and student loans. Updates to this article are in process. Check our One Big Beautiful Bill article for more information.
Key Takeaways
- Form 1040 Schedule 1 is the place to report types of income not included on Form 1040, including taxable refunds of state and local income taxes, alimony received, income or loss from a business; rent and royalty income, and more.
- Some items included on Schedule 1 must be accompanied by an additional form or schedule, such as Schedule C to report income or loss from a business or Schedule E to report rental income or royalties.
- You can include adjustments to income in Part II of Schedule 1. These can include contributions to health savings accounts, the deductible part of self-employment taxes, and IRA contribution deductions.
- Schedule 1 adjustments to income reduce your adjusted gross income without having to itemize deductions.
What is Form 1040 Schedule 1?
Schedule 1 (Form 1040) is an additional tax form used to report income and adjustments to income that aren’t listed directly on Form 1040.
While Form 1040 may be the main form people think of at tax time, most taxpayers need to attach one or more additional forms, or schedules, to their federal income tax return. One of these forms is Schedule 1 (Form 1040), which lists additional types of income not included on Form 1040, as well as some additional adjustments to income.
If you use TurboTax to file your tax return, you just need to answer a few questions, and we'll complete the right forms based on the information you provide. However it's still a good idea to familiarize yourself with the forms you need so you know what to look for when reviewing your tax return before filing.
Why do you need IRS Form 1040 Schedule 1?
You need Schedule 1 because Form 1040 only includes lines for the most common types of income, leaving other income and adjustments to be reported separately.
What types of income moved to Schedule 1?
Before the IRS and the Treasury redesigned Form 1040 in 2018, it included several lines for reporting various income types, including a catchall for "Other Income." It also included several lines for adjustments to income, also known as "above-the-line" deductions.
The new version gives taxpayers just a handful of lines for reporting the most common types of income, such as:
- wages
- interest and dividends
- retirement income
- Social Security benefits
- capital gains or losses
The need to report other income types and adjustments didn't go away — that reporting simply moved to Schedule 1.
How did Schedule 1 change beginning in 2024?
After Congress lowered the reporting thresholds for issuing Form 1099-K, Schedule 1 was updated to include a new section that simplifies entering amounts that don't affect your taxable income.
These include amounts reported on a 1099-K in error, such as personal money transfers or the sale of personal items at a loss, which are not taxable or deductible.
What new income is reported on Schedule 1 starting in 2024?
Also introduced in 2024 is line 8v in Section 1 for reporting digital assets received as ordinary income that are not reported elsewhere on your tax return.
This can include income from forks, staking, or mining, which aren't wages reported on line 1a, or capital gain or loss reported on Form 8949 and Schedule D.
What is Part I of Schedule 1?
Part I of Schedule 1 is where you'll report additional income, including:
- taxable refunds of state and local income taxes
- alimony received (for divorce agreements dated before December 31, 2018)
- income or loss from a business
- gains or losses from sales of business property
- rent and royalty income
- income from a partnership, S corporation, or trust
- farm income or loss
- unemployment compensation
What is Line 8 of Schedule 1?
Line 8 of Schedule 1 is now the catchall for other types of income that don't fit into the predefined lines, such as prizes and awards or gambling winnings.
Looking down the lines of Schedule 1, you may notice that some of these items also require an additional form or schedule. For example, if you have income or loss from a business, you'll also need to attach Schedule C to your return. If you need to report rent or royalties as income, you'll also have to attach Schedule E.
Once you have entered all of your various types of income on Schedule 1, the total is transferred to line 8 of Form 1040.
TurboTax Tip:
You don't have to use Schedule 1 if all of your income comes from the five categories included on Form 1040: wages, interest and dividends, retirement income, Social Security benefits, or capital gains or losses; and you don’t have any adjustments included on page 2.
What is Part II of Schedule 1?
Adjustments to income go in Part II of Schedule 1. These include:
- up to $300 in 2025 of unreimbursed expenses for educators who work in schools
- unreimbursed business expenses of military reservists, performing artists, and fee-based government officials (the only qualifying professions for certain business deductions)
- contributions to health savings accounts (HSAs)
- moving expenses for members of the Armed Forces
- the deductible part of self-employment taxes
- contributions to a SEP, SIMPLE, or qualified retirement plan
- health insurance premiums for self-employed people
- penalties for early withdrawals of savings
- alimony payments (for divorce agreements dated before December 31, 2018)
- IRA contribution deduction
- up to $2,500 of deductible student loan interest
- Archer MSA deduction
How do these deductions lower your adjusted gross income?
These are valuable deductions for many taxpayers because they directly reduce your adjusted gross income, which can open the door to other deductions and tax credits that have income limits.
For example, to claim the full American Opportunity Tax Credit, your 2025 modified adjusted income must be $80,000 or less ($160,000 or less if you're married and file a joint return with your spouse). You can't claim the credit if your modified adjusted gross income is over $90,000 ($180,000 for joint filers).
Say you have $91,000 of income. However, you contributed $3,000 to your health savings account, $8,000 to a SEP IRA, and paid student loan interest, adding up to $1,000. With a total of $12,000 in above-the-line deductions, your adjusted gross income drops to $79,000, meaning you're likely eligible for the full American Opportunity Tax Credit.
Why are above-the-line deductions easier to claim?
Another reason adjustments to income are so valuable is that you don't need to itemize your deductions to claim them.
Above-the-line deductions reduce your income before applying either the Standard Deduction or itemized deductions. Since nearly 90% of taxpayers take the Standard Deduction, above-the-line deductions are a nice tax break without the extra paperwork of itemizing.
Who needs to file Form 1040 Schedule 1?
Not everyone needs to attach Schedule 1 to their federal income tax return. You only need to file Schedule 1 if you have any of the additional types of income or adjustments to income mentioned above. The IRS trimmed down and simplified the old Form 1040, allowing people to add on forms as needed.
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