Schedule 1A OBBB: One Big Beautiful Bill Tax Provisions (2026)
The One Big Beautiful Bill Act (OBBB) introduced several new tax provisions for Tax Year 2025 and beyond, reported on Schedule 1A. This guide covers the four key provisions that may affect H-1B visa holders: tax-free tips, tax-free overtime pay, car loan interest deduction, and the senior standard deduction bonus.
What Is Schedule 1A?
Schedule 1A is a new IRS form introduced with the One Big Beautiful Bill Act (OBBB). It supplements Form 1040 by collecting information about income exclusions and above-the-line deductions created by the OBBB legislation. If you qualify for any OBBB provision, the amounts flow from Schedule 1A to Schedule 1 and ultimately reduce your adjusted gross income (AGI) or taxable income on Form 1040.
Schedule 1A has four main sections, each corresponding to a specific OBBB provision. You only complete the sections that apply to your tax situation.
Provision 1: Tax-Free Tips (Up to $25,000)
Under the OBBB, tips received by employees in traditionally tipped occupations are excludable from federal income tax, up to $25,000 per year. This exclusion applies to cash tips, credit card tips, and tip-sharing arrangements reported on your W-2.
How It Works
- Cap: Maximum $25,000 in tips can be excluded from gross income per tax year.
- Qualifying occupations: The exclusion applies to tips received in occupations where tipping is customary (food service, hospitality, personal care, transportation). Not all W-2 tip income qualifies.
- W-2 reporting: Tips are still reported in W-2 Box 7 (Social Security Tips) and Box 1 (Wages). The exclusion is claimed on Schedule 1A, which generates a deduction that offsets the included tip amount.
- FICA still applies: The income tax exclusion does not exempt tips from Social Security or Medicare tax. Your W-2 will still show FICA withholding on tip amounts.
H-1B relevance
Provision 2: Tax-Free Overtime Pay
The OBBB provides an exclusion for overtime pay earned by non-exempt (hourly) employees under the Fair Labor Standards Act (FLSA). Overtime hours (those exceeding 40 hours per workweek) that are compensated at 1.5x the regular rate can be excluded from federal income tax.
Key Details
- Who qualifies: Non-exempt (hourly) employees only. Salaried employees classified as FLSA-exempt do not qualify, even if they work more than 40 hours per week.
- Calculation: Only the overtime premium portion (the extra 0.5x above regular rate) is excludable. The base rate for those hours remains taxable.
- W-2 interaction: Employers report total wages in Box 1. The overtime exclusion is computed on Schedule 1A and subtracted from gross income.
- No income cap: Unlike the tip exclusion, there is no dollar cap on the overtime exclusion amount.
H-1B relevance
Provision 3: Car Loan Interest Deduction
The OBBB created a new above-the-line deduction for interest paid on auto loans used to purchase a vehicle for personal use. This is reported on Schedule 1A and reduces your AGI before the standard deduction is applied.
Requirements
- Qualifying vehicles: Cars, trucks, SUVs, and vans purchased for personal use. The vehicle must be titled in the taxpayer's name (or jointly with a spouse for MFJ filers).
- Made in America preference: The full deduction applies to vehicles assembled in the United States. Vehicles assembled outside the U.S. may have a reduced deduction amount.
- Loan requirement: Only interest on a loan (not a lease) qualifies. The loan must be from a qualified lender (bank, credit union, or licensed auto lender).
- Documentation: You need Form 1098-AUTO or an equivalent year-end interest statement from your lender showing total interest paid during the tax year.
H-1B relevance
Provision 4: Senior Standard Deduction Bonus
Taxpayers aged 65 or older receive an additional $4,000 increase to their standard deduction under the OBBB, on top of the existing age-based additional standard deduction amount. This bonus is reported on Schedule 1A.
How It Stacks
| Component | Single (65+) | MFJ (both 65+) |
|---|---|---|
| Base standard deduction | $15,000 | $30,000 |
| Existing age addition | $2,000 | $3,200 |
| OBBB senior bonus | $4,000 | $4,000 |
| Total standard deduction | $21,000 | $37,200 |
H-1B relevance
How Schedule 1A Flows to Your Return
Schedule 1A totals flow to Schedule 1 (Additional Income and Adjustments to Income), which in turn feeds into Form 1040 line 8 (other income) and line 10 (adjustments). The net effect is a reduction in your Adjusted Gross Income (AGI), which can also improve your eligibility for income-phased credits and deductions.
- Complete the relevant sections of Schedule 1A.
- Totals from Schedule 1A transfer to Schedule 1, Part II (Adjustments to Income).
- Schedule 1 totals flow to Form 1040, lines 8 and 10.
- Your AGI on line 11 of Form 1040 is reduced by the OBBB exclusions and deductions.
Common Questions for H-1B Holders
Can salaried H-1B workers benefit from the overtime exclusion? Generally no. Most H-1B positions are classified as FLSA-exempt (salaried, professional), which means overtime rules do not apply. If your employer classifies you as non-exempt and you receive overtime at 1.5x rate, you may qualify.
Does the car loan interest deduction apply to leases? No. Only interest on a purchase loan qualifies. Lease payments are not deductible under the OBBB provision.
Can I claim both the OBBB car loan deduction and a business vehicle deduction? No. If you deduct vehicle expenses on Schedule C (business use), you cannot also claim the personal-use car loan interest deduction on Schedule 1A for the same vehicle.
Related Resources
- Form 1040 for H-1B Visa Holders — Understanding the base return that Schedule 1A supplements
- Standard Deduction vs Itemized — How the senior bonus interacts with the standard deduction
- H-1B Visa Taxes: Complete Guide — Comprehensive overview of all H-1B tax obligations
Frequently Asked Questions
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H1B TaxFile Team
Written by the H1B TaxFile editorial team — tax professionals and software engineers who specialize in U.S. federal tax filing for H-1B visa holders, F-1 students, and nonresident aliens.
Reviewed by a licensed CPA with international tax experience.
Disclaimer: This guide is for educational purposes only and does not constitute tax or legal advice. Tax laws are complex and change frequently. Consult a qualified tax professional for advice specific to your situation.