Form 1040 Schedule 1: Additional Income and Adjustments to Income (2023)
What Form 1040 Schedule 1 Is For
Schedule 1 is an attachment to Form 1040, Form 1040-SR, or Form 1040-NR that serves a dual purpose: reporting additional income that doesn't fit on the main tax form and claiming adjustments to income that reduce your total income before arriving at adjusted gross income (AGI). Think of Schedule 1 as the ""overflow"" form that captures important financial information that makes your tax return more accurate and complete.
The form has two main sections. Part I captures various types of additional income—everything from business earnings and unemployment compensation to rental property income and gambling winnings. Part II lists adjustments to income, commonly called ""above-the-line"" deductions because they reduce your income before you calculate AGI. These adjustments include items like educator expenses, student loan interest, contributions to retirement accounts, and the deductible portion of self-employment tax. The totals from Schedule 1 flow directly onto your Form 1040: line 10 shows your additional income total, and line 26 shows your adjustments total.
You'll use Schedule 1 if your financial situation extends beyond wages, salaries, and standard deductions. For example, if you're self-employed, receive alimony under older divorce agreements, earn rental income, have a health savings account, or paid student loan interest, you'll need this schedule. It's required whenever you have income or deductions that can't be entered directly on Form 1040's main lines.
When You'd Use Form 1040 Schedule 1 (Including Late or Amended Returns)
You must file Schedule 1 with your original tax return when you have any income or adjustments that belong on this form. Most taxpayers file by April 15 (or April 17 in Maine and Massachusetts in 2024 due to holidays), but circumstances sometimes require late or amended filings.
If you miss the original deadline, you can request an automatic six-month extension by filing Form 4868 by the due date. This extension gives you more time to file but doesn't extend your payment deadline—interest accrues on unpaid taxes from the original due date. Certain taxpayers get automatic extensions without filing Form 4868: those living or serving in the military outside the United States and Puerto Rico receive an extra two months automatically, though they must include a statement explaining their situation with their return.
If you discover after filing that you forgot to include income or adjustments that should have appeared on Schedule 1—such as unreported unemployment compensation, a missed IRA deduction, or business income you overlooked—you'll need to file Form 1040-X (Amended U.S. Individual Income Tax Return). You must amend within three years of filing your original return or within two years of paying the tax, whichever comes later, to claim a refund. The IRS will correct simple math errors automatically, so you don't need to amend for those. However, changes to income, deductions, filing status, or credits require an amended return. Processing an amended return typically takes 8 to 12 weeks, though some cases take up to 16 weeks.
Key Rules or Details for 2023
Several important rules govern Schedule 1. First, understand what qualifies as ""additional income"" versus ordinary income reported elsewhere. Wages go on Form 1040 itself, but if you're self-employed, that business profit or loss gets calculated on Schedule C first, then transferred to Schedule 1, line 3. Similarly, investment income like interest and dividends appear on Form 1040 directly, while rental property income flows through Schedule E to Schedule 1, line 5.
Alimony has strict rules based on when your divorce or separation agreement was executed. You only report alimony received if your agreement was signed before December 31, 2018—newer agreements made alimony non-taxable to recipients and non-deductible for payers. If you're claiming the alimony paid adjustment, you must provide your former spouse's Social Security number and the date of the original agreement.
Adjustments to income have specific eligibility requirements. The educator expense deduction allows qualifying teachers to deduct up to $300 of unreimbursed classroom expenses. The student loan interest deduction phases out at higher income levels and requires that you're legally obligated to pay the interest. The IRA deduction depends on whether you or your spouse have workplace retirement plan coverage and your income level—there are detailed worksheets in the instructions to determine your allowed amount.
Self-employed individuals have several Schedule 1 adjustments available: the deductible portion of self-employment tax (one-half of what you paid), contributions to self-employed retirement plans (SEP-IRAs, SIMPLE plans), and the self-employed health insurance deduction. These adjustments can significantly reduce your taxable income, but each has specific calculation requirements and limitations.
Health Savings Account (HSA) deductions require that you have qualifying high-deductible health coverage and don't exceed annual contribution limits ($3,850 for self-only coverage or $7,750 for family coverage in 2023, with an additional $1,000 if age 55 or older). Moving expenses are only deductible for members of the Armed Forces on active duty moving pursuant to military orders.
Step-by-Step (High Level)
Begin by gathering all necessary documentation: Forms W-2, 1099 variants (1099-NEC for business income, 1099-MISC for miscellaneous income, 1099-G for unemployment, 1099-INT for interest), records of deductible expenses, and any previously completed schedules like Schedule C (business), Schedule E (rental/royalty), or Schedule F (farm income).
Complete any required underlying schedules first. If you operated a business, fill out Schedule C to determine your net profit or loss before transferring that amount to Schedule 1. If you have rental properties or partnership income, complete Schedule E. These supporting schedules provide the numbers you'll enter on Schedule 1's income lines.
Next, work through Schedule 1, Part I line by line. Enter taxable state and local income tax refunds on line 1 (only if you itemized deductions in the previous year and received a tax benefit). Report alimony received on line 2a with the agreement date on 2b. Transfer your Schedule C result to line 3, gains or losses from Form 4797 to line 4, Schedule E amounts to line 5, Schedule F results to line 6, and unemployment compensation from Form 1099-G to line 7. Lines 8a through 8z capture various other income types—carefully review the instructions to ensure you report items correctly and don't accidentally duplicate income reported elsewhere.
Move to Part II for adjustments to income. Line 11 is for educator expenses (up to $300 with proper documentation). Line 12 covers specific employment-related expenses for reservists, performing artists, and fee-basis government officials (attach Form 2106). Line 13 is your HSA deduction from Form 8889. Continue through each adjustment line that applies to you, using worksheets where indicated—particularly for the self-employed health insurance deduction (line 17), IRA deduction (line 20), and student loan interest (line 21).
Calculate the totals: add all amounts in Part I and enter the result on line 10, then add all Part II amounts and enter the total on line 26. Transfer line 10 to Form 1040, line 8 and line 26 to Form 1040, line 10. Attach Schedule 1 behind your Form 1040 along with any other required schedules and forms, organized by their sequence numbers. Sign and date your return, and file either electronically or by mail to the appropriate IRS address.
Common Mistakes and How to Avoid Them
One frequent error is reporting self-employment income on Schedule 1, line 8z (other income) instead of properly completing Schedule C first. Self-employment income from freelancing, consulting, or running a business must go through Schedule C to calculate net earnings and self-employment tax. Only then does the result transfer to Schedule 1. Putting it directly on line 8z causes you to miss important calculations and potentially underpay taxes.
Taxpayers often mishandle state and local tax refunds. If you took the standard deduction last year, your state refund isn't taxable—don't report it. Only report it if you itemized deductions and actually received a tax benefit from deducting state taxes. The instructions include a worksheet to determine the taxable portion.
Overlooking required worksheets leads to calculation errors. The self-employed health insurance deduction, IRA deduction, and student loan interest deduction all have worksheets that factor in income limits, other coverage, and eligibility rules. Skipping these worksheets often results in claiming too much or too little. For complex situations, such as having both a workplace retirement plan and making IRA contributions, the worksheet is essential to calculate the correct deductible amount.
Another mistake involves the alimony rules. Some taxpayers report alimony received from post-2018 divorce agreements, not realizing it became non-taxable. Conversely, those paying alimony under new agreements can't deduct it. The date of your original divorce or separation agreement determines which rules apply—and you must provide this date on Schedule 1. Failing to include your ex-spouse's Social Security number when claiming the alimony paid deduction will delay processing.
Mixing up income categories causes problems. For example, prizes and awards from your employer get reported as wages on Form W-2, not as other income. But prizes from contests or awards from organizations not connected to your job go on Schedule 1, line 8i. Similarly, hobby income should appear on line 8j (activity not engaged in for profit), while business income belongs on Schedule C. Understanding these distinctions prevents misclassification.
Taxpayers sometimes forget to attach required supporting forms. Schedule 1 itself doesn't contain all the detail—you must attach Schedule C for business income, Form 4797 for certain gains and losses, Form 2106 for employee business expenses, Form 8889 for HSA deductions, and other documentation as specified. Missing attachments delay processing and may result in adjustments to your return.
Finally, double-check name spellings and Social Security numbers. These must match Social Security Administration records exactly. Mismatches cause processing delays and can reduce credits or deductions. If you've changed your name through marriage or other circumstances, update your information with the Social Security Administration before filing.
What Happens After You File
Once you submit your return with Schedule 1 attached, the IRS begins processing. E-filed returns process much faster than paper returns—typically within 21 days for refunds versus six to eight weeks or longer for paper returns. The IRS checks for mathematical errors, missing information, and basic inconsistencies.
If the IRS identifies simple math errors, they'll correct them automatically and send you a notice explaining the change. You don't need to file an amended return for these corrections. However, if the IRS questions items on your Schedule 1—such as business income, deductions, or adjustments—they may send you a letter requesting documentation. Respond promptly with the requested records.
The adjustments you claimed on Schedule 1, Part II reduce your adjusted gross income, which affects eligibility for many other tax benefits. Lower AGI can increase your eligibility for the earned income credit, education credits, premium tax credits for health insurance, and certain deductions. The IRS uses your AGI to determine these benefits, so accurate Schedule 1 reporting directly impacts your overall tax situation.
If you're due a refund, you can track it using the ""Where's My Refund?"" tool on IRS.gov or the IRS2Go mobile app, available about 24 hours after e-filing or four weeks after mailing a paper return. For direct deposit refunds, most arrive within 21 days of acceptance. Paper check refunds take longer.
If you owe additional tax, payment is due by the filing deadline regardless of whether you file an extension. Interest accrues on unpaid balances from the original due date, and the IRS may also assess failure-to-pay penalties if you don't pay at least 90% of your tax liability by the due date. You can pay online through IRS.gov, by phone, by check, or through an installment agreement if you can't pay the full amount immediately.
Keep copies of your Schedule 1 and supporting documentation for at least three years from the filing date or two years from when you paid the tax, whichever is later. The IRS generally has three years to audit returns, though this extends to six years if you underreported income by more than 25%. Adequate records protect you if questions arise later.
FAQs
Do I need Schedule 1 if I only have wages from a W-2?
If your only income is wages reported on Form W-2 and you don't have any adjustments to income like student loan interest, IRA contributions, or educator expenses, you don't need Schedule 1. Your W-2 wages go directly on Form 1040. However, if you have even one adjustment—such as $300 in educator expenses—you must file Schedule 1 to claim it.
Can I deduct student loan interest if my parents paid my loan?
No. The student loan interest deduction requires that you're legally obligated to pay the interest and actually made the payments yourself. If someone else pays your loan—even parents helping you out—you can't deduct that interest. The person who paid it can't deduct it either because they're not legally obligated on the loan.
What's the difference between Schedule 1 adjustments and itemized deductions?
Schedule 1 adjustments to income, sometimes called ""above-the-line"" deductions, reduce your income before calculating adjusted gross income. You can claim these regardless of whether you itemize or take the standard deduction. Itemized deductions on Schedule A come ""below the line""—they're an alternative to the standard deduction and only benefit you if their total exceeds the standard deduction amount. Schedule 1 adjustments are typically more valuable because they reduce AGI, which affects eligibility for many credits and deductions.
I received unemployment benefits but also returned to work mid-year. Where do I report the unemployment?
Report all unemployment compensation on Schedule 1, line 7, even if you also earned wages during the same year. Your Form 1099-G from the state unemployment office shows the total amount you received. Enter that full amount on line 7. Your wages from Forms W-2 go on Form 1040 itself. The IRS doesn't care that you had both types of income in the same year—report each in its proper place.
If I'm self-employed and pay for my own health insurance, can I deduct the premiums?
Yes, if you show a net profit from self-employment on Schedule C and aren't eligible to participate in an employer's health plan (either your own employer if you have a separate job, or your spouse's employer). Calculate the deduction using the worksheet in the Schedule 1 instructions. This is one of the most valuable adjustments for self-employed individuals because health insurance is expensive. You can deduct premiums for yourself, your spouse, and your dependents—but you can't deduct more than your net self-employment income.
I got married in 2023. My spouse received alimony from a previous marriage before December 31, 2018. Do we report this on a joint return?
Yes. Alimony received under divorce or separation agreements executed before December 31, 2019, remains taxable to the recipient. On your joint return, include the alimony amount on Schedule 1, line 2a. Your spouse's ex must have your spouse's Social Security number for their records if they're deducting the alimony paid. The marriage to you doesn't change the tax treatment of alimony from the previous marriage.
What if I discover I forgot to claim an adjustment after I've already filed?
File Form 1040-X (Amended U.S. Individual Income Tax Return) to correct your return. You have three years from the original filing date or two years from when you paid the tax (whichever is later) to claim a refund. Attach a corrected Schedule 1 showing the adjustment you missed. Write an explanation in Part III of Form 1040-X describing what you're changing and why. Processing amended returns takes 8 to 12 weeks, sometimes longer. You can check the status using the ""Where's My Amended Return?"" tool on IRS.gov after about three weeks.
Source: All information compiled from official IRS publications including Form 1040 Schedule 1, Instructions for Form 1040 (2023), Tax Topic 303, and Tax Topic 308.
