Form 1040 Schedule 1: Additional Income and Adjustments to Income (2018)
What Form 1040 Schedule 1 Is For
Form 1040 Schedule 1 serves as a companion schedule to the redesigned 2018 Form 1040, capturing financial details that don't fit on the main tax return. In 2018, the IRS consolidated the old Forms 1040, 1040A, and 1040EZ into a single streamlined Form 1040, creating six numbered schedules to handle more complex tax situations. Schedule 1 specifically reports two categories of information: additional income that wasn't entered directly on Form 1040 (lines 10–21), and adjustments to income that reduce your total taxable income (lines 23–36).
Additional Income Reported on Schedule 1
The additional income section captures various income types including taxable state and local tax refunds, alimony received, business income or losses, capital gains or losses, rental income, unemployment compensation, and miscellaneous income like prizes, gambling winnings, and jury duty pay.
Adjustments to Income on Schedule 1
The adjustments section allows you to subtract certain expenses from your total income before calculating adjusted gross income (AGI)—items like educator expenses, IRA deductions, student loan interest, self-employment tax deductions, health savings account contributions, and alimony paid.
Who Typically Needs Schedule 1
Most taxpayers with straightforward W-2 wages and standard deductions won't need Schedule 1. However, if you're self-employed, sold investments, received unemployment benefits, have deductible IRA contributions, or claim various above-the-line deductions, Schedule 1 becomes essential. The form's purpose is to ensure all income gets reported while allowing eligible taxpayers to reduce their taxable income through legitimate adjustments before arriving at AGI—a critical number that affects eligibility for many tax credits and deductions.
When You’d Use Form 1040 Schedule 1 (Late Filing or Amended Returns)
You must file Schedule 1 along with your Form 1040 by the April 15, 2019 deadline (April 17 for Maine and Massachusetts residents due to regional holidays) if you have any reportable additional income or adjustments during tax year 2018. If you miss this deadline without filing for an extension, you can still file a late return—there's no statute of limitations preventing you from filing, though penalties and interest will accrue on any unpaid taxes from the original due date.
Late Filing and Amended Returns
If you discover errors or omissions on your original return after filing—perhaps you forgot to report unemployment compensation on line 19, overlooked an IRA deduction on line 32, or didn't claim educator expenses on line 23—you'll need to file Form 1040-X (Amended U.S. Individual Income Tax Return). When amending a 2018 return, you must include a corrected Schedule 1 showing the original amounts, the net change, and the corrected figures. Generally, you have three years from the date you filed your original return or two years from when you paid the tax (whichever is later) to file an amended return claiming a refund. For 2018 returns filed by the April 2019 deadline, this typically means you have until April 15, 2022, to amend.
Retroactive Law Changes and Corrected Information
The 2018 tax law changes included provisions for disaster relief that were enacted retroactively in 2019, meaning some taxpayers needed to file amended returns to claim benefits they were initially unaware of. Additionally, if you filed before receiving all necessary income documents—such as a corrected Form 1099-MISC showing business income or a Form 1099-G for state tax refunds—you must amend your return once you discover the discrepancy. Note that while modern tax software may handle Schedule 1 automatically, paper filers must physically attach Schedule 1 to Form 1040 and mail the complete package to the appropriate IRS processing center.
IRS Instructions for Form 1040 (2018)
Key Rules and Details for Tax Year 2018
Several fundamental rules govern Schedule 1 completion. First, the form uses a building-block approach where Schedule 1's line 22 (total additional income) flows to Form 1040, line 6, and is added to your wages, interest, dividends, and other income reported directly on Form 1040. After calculating your total income, you subtract Schedule 1's line 36 (total adjustments) on Form 1040, line 7, to arrive at your AGI.
Reporting Additional Income
For the additional income section, all amounts must be reported exactly as shown on supporting forms. Unemployment compensation from Form 1099-G goes on line 19 with no exceptions. Capital gains require careful attention—if you have only capital gain distributions reported in box 2a of Form 1099-DIV with no capital losses and no other sales of capital assets, you can simply enter the amount on line 13 and check the box. Otherwise, you must complete Form 8949 and Schedule D. Business income from Schedule C or rental income from Schedule E flows through to Schedule 1 automatically. State and local tax refunds on line 10 are only taxable if you itemized deductions in the prior year and received a tax benefit from them.
Claiming Adjustments to Income
The adjustments section has strict eligibility requirements. The educator expense deduction (line 23) caps at $250 and applies only to kindergarten through grade 12 teachers, counselors, and principals who worked at least 900 hours during the school year. The student loan interest deduction (line 33) phases out at higher income levels and applies only to qualified education loans for you, your spouse, or dependents. IRA deductions (line 32) depend on whether you or your spouse are covered by a workplace retirement plan, with phaseout ranges based on filing status and modified AGI. Self-employment tax deductions (line 27) equal exactly one-half of your self-employment tax from Schedule SE. For alimony paid (line 31a), you must enter the recipient's Social Security number and the payments must be required under a divorce or separation agreement executed before 2019—tax law changes eliminated the alimony deduction for agreements executed after December 31, 2018.
Special Rules for Specific Adjustments
Health savings account deductions (line 25) require completing Form 8889 and having an HSA-qualified high-deductible health plan. Moving expenses (line 26) were eliminated for most taxpayers in 2018, applying only to members of the Armed Forces on active duty moving due to a permanent change of station. Self-employed health insurance deductions (line 29) cannot exceed your net profit from self-employment and cannot be claimed if you're eligible for employer-subsidized coverage through your own or your spouse's employer.
IRS Instructions for Form 1040 (2018)
Step-by-Step (High Level)
Begin by gathering all relevant tax documents including W-2s, 1099 forms (1099-MISC, 1099-DIV, 1099-INT, 1099-G), Schedule C or E if you have business or rental income, and receipts for deductible expenses. Your first task is determining whether you need Schedule 1—review the income and adjustment categories to see if any apply to your situation.
Step 1: Complete the Additional Income Section (Lines 10–22)
Start with the additional income section (lines 10–21). Lines 1 through 9b are marked "Reserved" because those income types are reported directly on Form 1040. Enter any taxable state or local income tax refunds on line 10 using the State and Local Income Tax Refund Worksheet in the instructions. If you received alimony, enter the amount on line 11. For self-employment income, complete Schedule C or C-EZ first, then transfer your net profit or loss to line 12. If you sold stocks, bonds, or other investments, determine whether you qualify for the simplified entry on line 13 (check the instructions carefully), or if you must complete Form 8949 and Schedule D. Enter rental income or losses from Schedule E on line 16b, farm income from Schedule F on line 18, and unemployment compensation from Form 1099-G on line 19. Line 21 captures miscellaneous income like prizes, awards, gambling winnings, Alaska Permanent Fund dividends, and taxable portions of scholarships—list the type and amount. Add lines 10 through 21 and enter the total on line 22.
Step 2: Complete the Adjustments to Income Section (Lines 23–36)
Next, move to adjustments to income (lines 23–36). If you're an eligible K-12 educator, enter up to $250 of qualified expenses on line 23. Reservists, performing artists, and fee-basis government officials with work-related expenses complete Form 2106 and enter the result on line 24. Health savings account contributions go on line 25 using Form 8889. Armed Forces members with qualifying moves complete Form 3903 and enter moving expenses on line 26. If you're self-employed, enter one-half of your self-employment tax from Schedule SE on line 27. Self-employed retirement plan contributions go on line 28, and self-employed health insurance premiums on line 29 (use the worksheet in the instructions). Enter any penalties for early withdrawal of savings on line 30, and alimony paid with the recipient's SSN on line 31a. Calculate your IRA deduction using the worksheet and enter on line 32. Figure your student loan interest deduction with the worksheet and enter on line 33. Tuition and fees using Form 8917 go on line 34. Line 36 includes write-in adjustments like Archer MSA deductions or jury duty pay given to your employer—enter the amount and explanation.
Step 3: Transfer Totals to Form 1040 and File
Add lines 23 through 35 and enter the total on line 36. Transfer line 22 to Form 1040, line 6, combining it with other income items to calculate total income. Then subtract line 36 from Form 1040, line 6, and enter the result on Form 1040, line 7—this is your adjusted gross income. Attach Schedule 1 behind Form 1040 in the proper sequence when mailing your return. If filing electronically, the software handles attachment automatically.
IRS Instructions for Form 1040 (2018)
Common Mistakes and How to Avoid Them
Mathematical errors rank among the most frequent Schedule 1 mistakes. Taxpayers often miscalculate the line 22 total by missing one income line or add lines incorrectly on the adjustments section. Double-check every calculation, use a calculator, and verify that line 22 equals the sum of all additional income lines and line 36 equals the sum of all adjustment lines. Software eliminates math errors, but paper filers must be meticulous.
State Tax Refunds That Aren’t Taxable
Many taxpayers report state tax refunds on line 10 when they're not actually taxable. The refund is only taxable if you itemized deductions in 2017 and received a tax benefit from deducting state and local taxes. If you took the standard deduction in 2017, your state refund is not taxable—leave line 10 blank. Use the State and Local Income Tax Refund Worksheet to make this determination correctly.
Capital Gains Reporting Errors
Capital gains reporting causes confusion. Taxpayers often enter amounts on line 13 when they should have completed Schedule D, or they complete Schedule D unnecessarily when the simpler line 13 entry would suffice. Read the line 13 instructions carefully—you can only use this shortcut if you have capital gain distributions but no capital losses and no sales of capital assets. If you sold any stocks, bonds, mutual fund shares, or other investments, you need Schedule D and Form 8949, even if you have an overall gain.
Miscalculating IRA and Student Loan Deductions
The IRA deduction (line 32) trips up many filers who assume their entire contribution is deductible. If you or your spouse are covered by a retirement plan at work, your deduction may be reduced or eliminated depending on your modified AGI and filing status. Use the IRA Deduction Worksheet—don't simply enter your full contribution amount without checking the phaseout rules. Similarly, the student loan interest deduction (line 33) phases out at higher income levels, so you must use the worksheet rather than deducting the full amount shown on Form 1098-E.
Alimony Reporting Issues
Alimony creates dual errors. Payers sometimes claim alimony deductions for payments that don't qualify—child support, property settlements, and voluntary payments don't count. The payments must be required under a divorce or separation instrument executed before 2019, made in cash or check, and not designated as non-deductible. Additionally, failing to enter the recipient's Social Security number on line 31b will cause IRS processing delays or rejection. Recipients must also report alimony as income on line 11, and the amounts must match—mismatches trigger IRS notices.
Overlooking Self-Employment Tax Deductions
Self-employed taxpayers frequently forget the self-employment tax deduction on line 27. This isn't optional—if you filed Schedule SE and owe self-employment tax, you're entitled to deduct half of it as an adjustment to income. This deduction significantly reduces AGI and improves eligibility for other tax benefits. Don't overlook it.
Name and SSN Mismatches
Another common error involves mismatching Social Security numbers. If you claim an IRA deduction for a spousal IRA or enter a recipient SSN for alimony, ensure the numbers are correct and match Social Security cards exactly. Name and SSN mismatches cause processing delays and rejected returns.
Failing to Attach Schedule 1
Finally, taxpayers sometimes forget to attach Schedule 1 to their Form 1040 when filing by paper. Without the schedule, the IRS cannot process your return correctly, resulting in notices, processing delays, and potential underpayment of taxes or loss of refunds. Always assemble your return in the correct order with all required schedules attached.
IRS Instructions for Form 1040 (2018)
What Happens After You File
Once you mail your return with Schedule 1 or file electronically, the IRS processes it through a series of automated and manual checks. Electronic returns typically process faster—the IRS acknowledges receipt within 24-48 hours and most refunds are issued within 21 days. Paper returns take longer, often six to eight weeks for processing. You can check your refund status using the "Where's My Refund?" tool on IRS.gov or the IRS2Go mobile app starting 24 hours after e-filing or four weeks after mailing a paper return.
IRS Matching and Error Corrections
The IRS's automated systems verify mathematical accuracy, matching computations on Schedule 1 against Form 1040 to ensure line 22 properly flows to line 6 and line 36 is correctly subtracted on line 7. Computers also cross-check reported income against forms submitted by employers, banks, brokerages, and other payers—Forms W-2, 1099-MISC, 1099-DIV, 1099-INT, and 1099-G in the IRS database. If Schedule 1 reports unemployment compensation that doesn't match state-submitted Form 1099-G records, or if business income seems inconsistent with known information, the return may be flagged for review.
When the IRS identifies simple mathematical errors, they correct them automatically and send you a notice (often CP12 for refund changes or CP11 for balance due adjustments) explaining the correction. If the change is in your favor, you'll receive a larger refund; if not, you may owe additional tax. You have the right to dispute these corrections within 60 days if you believe the IRS made an error.
Audits and Correspondence
More complex issues may trigger correspondence audits where the IRS requests documentation to verify Schedule 1 entries. Common audit triggers include large casualty losses reported as "other income" on line 21, unusually high business losses on line 12, missing Form 1099 income that payers reported but you omitted, or deductions that seem disproportionate to income. If selected for audit, you'll receive a written notice (typically CP2000 or a formal audit letter) explaining what information is needed. You must respond by the deadline and provide supporting documentation like receipts, bank statements, canceled checks for alimony payments, or Form 1098-E for student loan interest.
Impact on Credits and Penalties
Refunds for returns claiming the Earned Income Credit or Additional Child Tax Credit face mandatory delays—the IRS cannot issue these refunds before mid-February to allow time for fraud prevention checks. If your Schedule 1 affects your AGI, it may impact these credits calculated elsewhere on your return.
If you owe taxes and didn't pay the full amount by the filing deadline, the IRS assesses interest (compounded daily at the federal short-term rate plus three percentage points) and may assess failure-to-pay penalties (0.5% per month, up to 25% of unpaid taxes). Filing late without an extension also triggers failure-to-file penalties (5% per month, up to 25%), which are more severe. Pay as much as possible by the deadline and set up a payment plan on IRS.gov or by calling the number on your notice to minimize penalties.
Recordkeeping and Amended Returns
Keep copies of your complete return including Schedule 1 and all supporting documents for at least three years from the filing date or two years from when you paid the tax, whichever is later. The IRS can audit returns within this timeframe, and you'll need documentation to substantiate your entries. For returns involving substantial business assets or potential fraud issues, retain records longer.
If you later discover you made an error on Schedule 1—forgot to report income, missed a deduction, or calculated something incorrectly—file Form 1040-X as soon as possible. Early amendments may minimize interest and penalty charges. The amended return process takes longer than original returns, typically eight to twelve weeks for paper submissions. You can track amended return status online using the "Where's My Amended Return?" tool on IRS.gov.
IRS Instructions for Form 1040 (2018)
FAQs
If I only have W-2 income and take the standard deduction, do I need Schedule 1?
No. If your only income is from wages reported on Form 1040, line 1, and you have no additional income sources or adjustments to claim, you don't need Schedule 1. Many taxpayers with simple returns file only Form 1040 without any schedules. Schedule 1 is required only when you have income types that don't fit on the main form (like self-employment income, unemployment benefits, or capital gains) or when you claim adjustments to income (like IRA deductions, student loan interest, or educator expenses).
My state sent me a tax refund this year. Is it taxable and do I report it on Schedule 1?
It depends on whether you itemized deductions on your prior year (2017) tax return. If you took the standard deduction in 2017, your state refund is not taxable and you don't report it anywhere. If you itemized and claimed a deduction for state and local income taxes on Schedule A in 2017, you must use the State and Local Income Tax Refund Worksheet in the Form 1040 instructions to determine how much, if any, of your refund is taxable. Only the amount that actually reduced your 2017 federal tax is taxable. Report any taxable portion on Schedule 1, line 10.
Can I deduct my entire IRA contribution on line 32, or are there limits?
IRA deduction rules are complex. If neither you nor your spouse is covered by a retirement plan at work (like a 401(k)), you can deduct your full contribution up to the annual limit ($5,500 for most people in 2018, or $6,500 if age 50 or older). However, if you or your spouse has workplace retirement plan coverage, your deduction may be reduced or eliminated depending on your modified adjusted gross income and filing status. For 2018, the phaseout ranges vary—for example, single filers covered by a workplace plan begin losing the deduction at $63,000 of modified AGI and lose it entirely at $73,000. You must use the IRA Deduction Worksheet in the instructions to calculate your allowable deduction accurately.
I'm self-employed. What adjustments on Schedule 1 am I entitled to claim?
Self-employed individuals have several valuable adjustments available. First, you can deduct one-half of your self-employment tax (calculated on Schedule SE) on line 27—this is mandatory, not optional. Second, you can deduct contributions to self-employed retirement plans like SEP-IRAs or solo 401(k)s on line 28. Third, you may deduct health insurance premiums paid for yourself, your spouse, and dependents on line 29, subject to certain limits. These adjustments reduce your adjusted gross income, potentially qualifying you for additional credits and deductions elsewhere on your return. Make sure you're also tracking business expenses properly on Schedule C to minimize your net profit subject to self-employment tax.
I forgot to include Schedule 1 with my original return but I had unemployment income. What should I do?
File an amended return using Form 1040-X as soon as possible. Complete a corrected Schedule 1 showing your unemployment compensation on line 19, recalculate your total income and adjusted gross income, and determine whether you owe additional tax or are entitled to a refund. Attach the corrected Schedule 1 and a completed Form 1040-X explaining the changes. If you owe tax, pay it promptly to minimize interest and penalties. You have three years from your original filing date to amend and claim a refund, but there's no time limit if you owe additional tax—filing quickly is always best to limit interest charges.
What's the difference between entering capital gains on Schedule 1 line 13 versus using Schedule D?
Line 13 provides a shortcut for simple situations. You can enter your capital gain distributions directly on line 13 and check the box if all three conditions are met: (1) you have capital gain distributions from mutual funds or other investments shown in box 2a of Form 1099-DIV, (2) you don't have any capital losses, and (3) you didn't sell any stocks, bonds, or other capital assets during the year. If you fail any of these tests—for example, you sold some stock or you have capital losses—you must complete Form 8949 to report each transaction individually, then summarize on Schedule D, and enter the Schedule D amount on Schedule 1, line 13. Don't check the box when you use Schedule D.
My employer reimbursed my moving expenses in 2018. Does that affect Schedule 1?
For most taxpayers, yes. The 2018 tax law suspended the moving expense deduction except for active-duty military moving due to permanent change of station orders. If you received moving expense reimbursements from your employer and you're not a qualifying military member, those reimbursements are taxable income and should be included in box 1 of your Form W-2 as wages. You don't make any entries on Schedule 1 unless you're in the military and have deductible moving expenses calculated on Form 3903, which would go on line 26. For non-military members, moving reimbursements are simply part of your W-2 wages with no offsetting deduction available.
Sources
All information is sourced from official IRS publications:
