What the Form Is For

Schedule 1 (Form 1040) was introduced in 2018 as part of the IRS's redesign of the tax filing system. Think of it as an "overflow" form that captures income and deductions that don't fit on the main Form 1040. When the IRS streamlined Form 1040 that year (eliminating the old Forms 1040A and 1040EZ), they created Schedule 1 to handle the "extras."

The form has two main sections. Part I: Additional Income (lines 10-21) covers money you received beyond your regular wages—things like unemployment benefits, business income, gambling winnings, jury duty pay, and taxable state tax refunds. Part II: Adjustments to Income (lines 23-36) lets you claim deductions that reduce your taxable income before you calculate your actual tax bill. These adjustments include educator expenses, student loan interest, IRA contributions, and the deductible portion of self-employment tax.

Not everyone needs Schedule 1. If you only have W-2 wages, take the standard deduction, and don't claim special credits, you probably won't touch this form. But if you're self-employed, received a state tax refund after itemizing last year, paid student loan interest, or have any of dozens of other income sources or deductions, Schedule 1 becomes your companion to Form 1040.

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When You'd Use It (Late/Amended Returns)

You must file Schedule 1 with your original 2018 tax return if you have any income or adjustments listed on the form. The deadline was April 15, 2019 (or April 17 for Maine and Massachusetts residents due to state holidays). If you missed that deadline and need to file a late return, Schedule 1 still attaches to your Form 1040—just be prepared for late-filing penalties and interest if you owe taxes.

For amended returns, if you discover you forgot to report additional income or missed claiming adjustments like the student loan interest deduction, you'll need to file Form 1040-X (Amended U.S. Individual Income Tax Return) and include a corrected Schedule 1. Common reasons for amending include discovering you were eligible for educator expenses you didn't claim, realizing you had taxable unemployment compensation you forgot about, or finding out your state tax refund was actually taxable because you itemized the previous year.

If you got an automatic six-month extension by filing Form 4868, your extended deadline for Schedule 1 matched your Form 1040 deadline—October 15, 2019 for most taxpayers. The extension gave you more time to file but not more time to pay; any taxes owed on income reported on Schedule 1 still accrued interest from the original April deadline.

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Key Rules for 2018

The 2018 tax year brought significant changes due to the Tax Cuts and Jobs Act, and several affect Schedule 1 directly. The moving expense deduction (line 26) was eliminated for most taxpayers—only members of the Armed Forces on active duty with orders for a permanent change of station can still claim it. The domestic production activities deduction (line 35) was also repealed for most people, though some pass-through entities with fiscal years could still claim it using line 36.

On the flip side, the tuition and fees deduction (line 34) remained available for 2018 through retroactive legislation, allowing up to $4,000 depending on your income. The student loan interest deduction (line 33) caps at $2,500 and phases out for single filers with modified adjusted gross income between $65,000 and $80,000 ($135,000 to $165,000 for joint filers).

For alimony, a major change took effect: if your divorce or separation agreement was executed after December 31, 2018, alimony is no longer deductible by the payer or taxable to the recipient. But for 2018 returns covering pre-2019 agreements, the old rules apply—payers deduct on line 31a, recipients report on line 11, and you must include the recipient's Social Security number or face penalties.

Educator expenses (line 23) allow eligible K-12 teachers and administrators to deduct up to $250 of unreimbursed classroom expenses ($500 for married couples who are both educators). The self-employed health insurance deduction (line 29) lets self-employed individuals and more-than-2% S corporation shareholders deduct health insurance premiums, but the insurance must be established under your business.

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Step-by-Step (High Level)

Step 1: Determine if you need Schedule 1.

Review your income sources and potential deductions. If you have anything beyond basic W-2 wages for income, or any deductions beyond the standard deduction and basic credits, you likely need it.

Step 2: Complete Part I—Additional Income (lines 10-21).

Start with line 10 if you received a state or local tax refund and itemized last year (use the worksheet in the instructions to determine if it's taxable). Report alimony received on line 11, business income or loss from Schedule C on line 12, and capital gains from Schedule D on line 13. Line 19 captures unemployment compensation from Form 1099-G. Line 21 is the catch-all for miscellaneous income like prizes, jury duty pay, gambling winnings, canceled debts, or hobby income—list each type and amount. Add all income items and enter the total on line 22.

Step 3: Complete Part II—Adjustments to Income (lines 23-36).

Claim educator expenses on line 23 (up to $250). If you're self-employed, you'll likely use line 27 (half of self-employment tax from Schedule SE), line 28 (retirement plan contributions), and line 29 (health insurance premiums). Line 32 handles IRA deductions—use the worksheet to calculate based on your income and whether you're covered by a workplace retirement plan. Line 33 claims student loan interest (up to $2,500, using the worksheet). Add all adjustments and enter the total on line 36.

Step 4: Transfer totals to Form 1040.

Enter the Schedule 1, line 22 total on Form 1040, line 6 (adding it to your other income). Enter the Schedule 1, line 36 total on Form 1040, line 8a to reduce your total income and calculate your adjusted gross income.

Step 5: Attach Schedule 1 to your Form 1040 and file.

Whether you file electronically or by mail, Schedule 1 must accompany your return.

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Common Mistakes and How to Avoid Them

Mistake #1: Reporting business income on line 21.

Many taxpayers mistakenly put self-employment income or earnings shown on Form 1099-MISC in the "Other income" catch-all on line 21. This is wrong—business income belongs on Schedule C, and you report the result on Schedule 1, line 12. Line 21 is only for miscellaneous items that don't fit elsewhere, like prizes, jury duty pay, or hobby income.

Mistake #2: Forgetting taxable state refunds.

If you itemized deductions on your 2017 return and received a state or local tax refund in 2018 (shown on Form 1099-G), it may be taxable. Many people don't realize they need to report this on line 10. Use the State and Local Income Tax Refund Worksheet in the instructions to calculate the taxable amount correctly.

Mistake #3: Not providing the recipient's SSN for alimony paid.

Line 31b requires you to enter your ex-spouse's Social Security number when claiming the alimony deduction. Failing to do this can trigger a $50 penalty and cause the IRS to disallow your deduction. Double-check you have the correct SSN before filing.

Mistake #4: Exceeding educator expense limits.

Teachers sometimes deduct more than the $250 limit ($500 for married couples filing jointly if both are educators) on line 23. The IRS will adjust your return, and you'll get a notice. Keep receipts for qualifying expenses like books, supplies, and classroom equipment, and don't exceed the cap.

Mistake #5: Claiming disallowed moving expenses.

Unless you're active-duty military moving due to military orders, you can't deduct moving expenses for 2018. This common mistake stems from the fact that the deduction was available in prior years. Civilians who claim line 26 will have their deduction denied.

Mistake #6: Using incorrect worksheets.

The IRS provides specific worksheets for IRA deductions (line 32), student loan interest (line 33), and self-employed health insurance (line 29). Skipping these worksheets or calculating incorrectly leads to errors that delay refunds or trigger audits. Follow the step-by-step instructions carefully.

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What Happens After You File

Once you file your Form 1040 with Schedule 1 attached, the IRS processes your return through their systems. If you e-filed, you typically receive an acknowledgment within 24-48 hours confirming they received your return. Paper returns take much longer—often 6-8 weeks just to enter the system.

The IRS computers check your Schedule 1 entries against third-party documents they've received, like Forms 1099-G (state refunds), 1099-INT (interest income), W-2s, and other information returns. If numbers don't match or something seems off, you may receive a CP2000 notice, which proposes changes to your return. This isn't technically an audit, but you'll need to respond with documentation or agree to the changes and pay additional tax.

For adjustments to income on lines 23-36, the IRS may request documentation during processing, especially for larger amounts. For example, if you claimed a $5,000 self-employed health insurance deduction on line 29, they might ask for proof the policy was established under your business and that you weren't eligible for employer-sponsored coverage.

Refunds: If Schedule 1 increased your total income (Part I) or your adjustments weren't enough to offset it, you might owe more tax. Conversely, if your adjustments significantly reduced your adjusted gross income, you might be due a larger refund. Most refunds arrive within 21 days if you e-filed with direct deposit. Paper returns take 6-8 weeks or longer.

Adjustments and Corrections: If the IRS finds an error on your Schedule 1, they'll either correct it automatically (sending you a notice explaining the change) or contact you requesting clarification. Common adjustments include recalculating student loan interest deductions based on income phase-outs or correcting IRA deductions if you exceeded contribution limits.

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FAQs

Q1: Do I need Schedule 1 if I only have W-2 income and take the standard deduction?

No. Schedule 1 is only necessary if you have additional income beyond what's reported on Form 1040 lines 1-5b or if you're claiming adjustments to income. Basic W-2 employees who take the standard deduction and have no other income or special deductions can skip Schedule 1 entirely.

Q2: What's the difference between "adjustments to income" on Schedule 1 and "itemized deductions" on Schedule A?

Adjustments to income (Schedule 1, Part II) reduce your total income to arrive at your adjusted gross income (AGI), and you can claim them whether you itemize or take the standard deduction. Itemized deductions (Schedule A) are claimed instead of the standard deduction and include things like mortgage interest, charitable donations, and medical expenses. Adjustments are generally more valuable because they reduce your AGI, which affects your eligibility for other tax benefits.

Q3: I received a state tax refund but didn't itemize last year. Do I still report it on line 10?

No. State tax refunds are only taxable if you itemized deductions on your prior-year return and claimed the state and local tax deduction. If you took the standard deduction in 2017, your 2018 state refund is not taxable, and you don't report it on Schedule 1.

Q4: Can I deduct student loan interest if my parents paid it?

It depends. If you're legally obligated to pay the loan (your name is on the loan agreement) and your parents made the payments as a gift to you, you can deduct the interest (up to the $2,500 limit and subject to income phase-outs). However, if your parents took out the loan in their names, they would claim the deduction, not you—even if it paid for your education.

Q5: I'm self-employed. Which adjustments on Schedule 1 apply to me?

Several! Line 27 lets you deduct half of your self-employment tax calculated on Schedule SE. Line 28 covers contributions to self-employed retirement plans like SEP-IRAs or Solo 401(k)s. Line 29 allows deduction of health insurance premiums if the policy was established under your business and you weren't eligible for employer-sponsored coverage. These adjustments are valuable because they directly reduce your taxable income.

Q6: What happens if I forget to attach Schedule 1 to my Form 1040?

If you completed Schedule 1 but forgot to attach it, the IRS will likely contact you requesting the missing schedule. This can delay your refund significantly. If you e-file, the software typically won't let you submit without required schedules, reducing this risk. If you paper file and realize the mistake after mailing, you can send the schedule separately with a cover letter explaining the error, but it's better to file a complete package from the start.

Q7: Are gambling winnings reported on Schedule 1, and can I deduct my losses?

Yes, gambling winnings go on Schedule 1, line 21 (you'll list "gambling winnings" and the amount). However, you can only deduct gambling losses up to the amount of your winnings, and only if you itemize deductions on Schedule A. If you take the standard deduction, you report all winnings as income but can't offset them with losses—a situation that catches many casual gamblers off guard.

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This summary is based on official IRS publications for tax year 2018. For complete details, refer to the Instructions for Form 1040 and Schedule 1 at IRS.gov or consult a qualified tax professional.