What the Form Is For

Schedule 1 is an attachment to your main tax return (Form 1040 or 1040-SR) that serves two important purposes. Think of it as the "catch-all" form for income and deductions that don't fit neatly on your basic tax return. The form has two parts: Part I captures additional income you received during the year, while Part II lists adjustments that reduce your taxable income—often called "above-the-line" deductions because they lower your Adjusted Gross Income (AGI) before you even decide whether to take the standard deduction or itemize.

You'll use Schedule 1 if you have income beyond just wages, salaries, interest, and dividends. This includes self-employment income, rental property earnings, unemployment benefits, freelance work, prize money, cryptocurrency income, or even jury duty pay. The form also lets you claim valuable deductions like educator expenses, student loan interest, contributions to retirement accounts, and Health Savings Account (HSA) contributions—all of which directly reduce the amount of income subject to tax. IRS.gov

Essentially, if your tax situation is more complex than a straightforward W-2 job, you'll likely need Schedule 1. The totals from both parts get transferred to specific lines on your main Form 1040, ensuring all your income is properly reported and all eligible adjustments are claimed.

When You'd Use It (Including Late or Amended Returns)

You must file Schedule 1 along with your 2025 tax return (due April 15, 2026) if you have any of the income types or adjustments listed on the form. Most taxpayers file electronically, and tax software automatically includes Schedule 1 when needed. If you're filing a paper return, you'll attach Schedule 1 to your Form 1040.

Late Filing

If you miss the April deadline and didn't request an extension, you should still file as soon as possible to minimize penalties and interest. The failure-to-file penalty is typically 5% of unpaid taxes per month (up to 25%), while the failure-to-pay penalty is 0.5% per month. If you're owed a refund, there's no penalty for filing late, but you only have three years from the original due date to claim that refund.

Extensions

You can get an automatic six-month extension to file by submitting Form 4868 by April 15. However, this only extends your filing deadline—not your payment deadline. You must still estimate and pay any taxes owed by April 15 to avoid interest and penalties. With an extension, your deadline becomes October 15, 2026.

Amended Returns

If you discover an error after filing—such as forgotten income, missed deductions on Schedule 1, or incorrect amounts—you'll file Form 1040-X (Amended U.S. Individual Income Tax Return). You can now file amended returns electronically for the current year and two prior years. Generally, you have three years from the original filing date (or two years from when you paid the tax, whichever is later) to file an amended return to claim a refund. When amending, you'll attach a corrected Schedule 1 if the changes involve additional income or adjustments to income. IRS.gov

Key Rules for 2025

Several important updates and thresholds apply to the 2025 tax year:

Form 1099-K Reporting Threshold

For 2025, payment apps and online marketplaces (like PayPal, Venmo, Cash App, eBay) must send you a Form 1099-K if your total business transactions exceed $2,500 (down from $5,000 in 2024). Starting in 2026, the threshold drops to just $600. If you received a 1099-K for personal transactions (like splitting rent with roommates) or for personal items sold at a loss (selling your used couch for less than you paid), you'll report these amounts at the top of Schedule 1 to explain they shouldn't be taxed. IRS.gov

Digital Assets (Cryptocurrency)

The IRS continues to focus on cryptocurrency and NFT income. If you received digital assets as ordinary income—such as mining rewards, staking income, airdrops, or payment for services—and it wasn't reported elsewhere on your return, you must report it on Schedule 1, line 8v. This is separate from capital gains/losses from selling crypto, which go on Form 8949 and Schedule D.

Educator Expenses

Eligible K-12 teachers and educators can deduct up to $300 of unreimbursed classroom expenses ($600 if married filing jointly and both are educators). This includes books, supplies, equipment, and COVID-related protective items.

Student Loan Interest

You can deduct up to $2,500 of student loan interest paid, subject to income limits. For 2025, the deduction phases out for modified AGI between $80,000-$95,000 (single) or $165,000-$195,000 (married filing jointly).

IRA Contributions

You can deduct traditional IRA contributions up to $7,000 ($8,000 if age 50 or older) for 2025, though deduction limits apply if you or your spouse are covered by a workplace retirement plan and your income exceeds certain thresholds.

HSA Contributions

For 2025, you can contribute and deduct up to $4,300 for self-only coverage or $8,550 for family coverage (plus $1,000 catch-up if age 55+).

Alimony

Only alimony paid under divorce or separation agreements finalized before January 1, 2019, is deductible. The recipient must include it as income. Agreements finalized in 2019 or later follow different rules where alimony is neither deductible nor taxable.

Step-by-Step (High Level)

Part I – Additional Income (Lines 1–10)

Review your records for all income sources beyond W-2 wages: Look for Forms 1099-G (unemployment), 1099-K (payment apps), 1099-MISC (miscellaneous income), and business records.

Special 1099-K entry at top: If you received Forms 1099-K for personal transactions or items sold at a loss, enter the total in the box at the top of Schedule 1 to reduce your taxable income.

Report each income type on its line:

• Line 1: State tax refunds (if you itemized last year)
• Line 2a: Alimony received (pre-2019 agreements)
• Line 3: Business income/loss (attach Schedule C)
• Line 5: Rental income (attach Schedule E)
• Line 7: Unemployment compensation
• Line 8 subsections: Various other income including prizes, gambling winnings, jury duty pay, cryptocurrency income (line 8v), and more

Total: Add lines 1–9 and enter the total on line 10. This amount transfers to Form 1040, line 8.

Part II – Adjustments to Income (Lines 11–26)

Gather documentation for deductions: receipts for educator expenses, Form 1098-E for student loan interest, contribution records for IRAs and HSAs, etc.

Enter each adjustment on its line:

• Line 11: Educator expenses (up to $300/$600)
• Line 13: Moving expenses (military only, attach Form 3903)
• Line 14: HSA deduction (attach Form 8889)
• Line 15: Deductible self-employment tax (from Schedule SE)
• Line 16: Self-employed retirement plan contributions
• Line 17: Self-employed health insurance
• Line 19a: Alimony paid (pre-2019 agreements)
• Line 20: IRA deduction
• Line 21: Student loan interest
• Line 24: Other adjustments (jury duty pay given to employer, attorney fees for certain claims, etc.)

Total: Add lines 11–25 and enter the total on line 26. This amount transfers to Form 1040, line 10, reducing your AGI.

Review and attach: Double-check all figures, attach any required forms (Schedules C, E, F, SE, Forms 8889, 3903, etc.), and staple Schedule 1 to your Form 1040 if filing by mail.

Common Mistakes and How to Avoid Them

1. Forgetting 1099-K Income
   With lower reporting thresholds, many taxpayers receive 1099-K forms for the first time. Don't ignore them—even if the income is from a side gig. Report business income properly or use the special entry box if transactions were personal. Solution: Keep good records of all payment app transactions and distinguish business from personal.
2. Misreporting Digital Assets
   Many people forget that crypto mining, staking rewards, and airdrops count as ordinary income when received, separate from capital gains when sold. Solution: Track all crypto transactions throughout the year and report ordinary income on line 8v.
3. Claiming Ineligible Alimony Deductions
   Post-2018 divorce agreements don't allow alimony deductions. Solution: Check your divorce decree date. If finalized in 2019 or later, you cannot deduct alimony payments.
4. Missing Required Supporting Forms
   Claiming an HSA deduction without Form 8889, or business income without Schedule C, will trigger IRS inquiries. Solution: Tax software usually catches this, but if filing paper returns, use the checklist on Form 1040 instructions to ensure all schedules are attached.
5. Exceeding Income Limits
   Many adjustments phase out at higher incomes (student loan interest, IRA deductions). Claiming the full amount when you're not eligible leads to adjustments. Solution: Use IRS worksheets or tax software to calculate phaseouts accurately.
6. Math Errors
   Simple addition mistakes on Schedule 1 delay processing. Solution: Double-check all calculations or use tax software that computes automatically.
7. Not Reporting Unemployment Compensation
   All unemployment benefits are taxable—a surprise for some taxpayers. Solution: Report the full amount from Form 1099-G on line 7, even if you had taxes withheld.
8. Overlooking Educator Expenses
   Teachers often forget this valuable deduction. Solution: Save receipts for classroom supplies throughout the year and claim up to the limit.

What Happens After You File

Immediate Processing

Once the IRS receives your return (electronically or by mail), it goes through initial processing to check for completeness, math errors, and missing forms. E-filed returns typically process within 21 days, while paper returns can take 6–8 weeks or longer.

Refunds

If you're owed a refund and file electronically with direct deposit, expect payment within 21 days under normal circumstances. However, if you claimed the Earned Income Credit (EIC) or Additional Child Tax Credit, federal law requires the IRS to hold refunds until at least mid-February, even if you file in January. You can track your refund status using the "Where's My Refund?" tool at IRS.gov.

Refund Offsets

If you owe past-due federal or state taxes, child support, spousal support, or federal student loans, the Treasury Offset Program may intercept all or part of your refund to pay those debts. You'll receive a notice explaining any offset.

Additional Review

Some returns are selected for additional review or audit, particularly if Schedule 1 shows unusual income patterns, large deductions, or potential discrepancies with information the IRS has from third parties (like Forms 1099). This doesn't necessarily mean you did anything wrong—it may just require documentation.

Notices and Corrections

If the IRS finds an error on your Schedule 1 or main return—such as unreported income from a 1099 you forgot about—you'll receive a notice (typically CP2000) proposing changes. You'll have an opportunity to respond, either agreeing with the changes, providing additional information, or disputing the adjustment.

Record Retention

Keep copies of your return, Schedule 1, all supporting documents, and receipts for at least three years (the general audit period), or longer if you've significantly underreported income or claimed certain losses.

FAQs

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

No. If your only income is from wages reported on Form W-2, and you're not claiming any adjustments to income, you won't need Schedule 1. You'll simply complete the main Form 1040. However, if you have even small amounts of other income (like $50 in jury duty pay) or qualify for adjustments (like $200 in educator expenses), you must file Schedule 1.

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 Adjusted Gross Income (AGI) regardless of whether you take the standard deduction or itemize. These are sometimes called "above-the-line" deductions and are available to everyone who qualifies. Itemized deductions (Schedule A) are "below-the-line" and only benefit you if they exceed your standard deduction ($15,000 for single filers in 2025, $30,000 for married filing jointly). Schedule 1 adjustments are generally more valuable because they don't depend on choosing to itemize.

Q3: I received a 1099-K for selling personal items on Facebook Marketplace. Do I owe taxes?

Not if you sold personal items (like used furniture, clothes, or household goods) for less than you originally paid. These sales represent a personal loss, not taxable income. For 2025, enter the amount from the 1099-K in the special box at the top of Schedule 1 to indicate it was for personal items sold at a loss. This removes it from your taxable income. However, if you sold items for profit or ran a business selling goods, that income is taxable and goes on Schedule C.

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

Yes, but only if you're legally obligated to pay the loan and your name is on the loan documents. If your parents paid the loan as a gift to you, the IRS treats it as though you received the money and then paid the loan yourself. You can deduct the interest (up to $2,500) if you meet the income requirements, even though your parents made the actual payment. However, your parents cannot deduct it.

Q5: I have cryptocurrency that increased in value but didn't sell it. Do I report anything on Schedule 1?

No. Simply holding cryptocurrency (or any investment) that has increased in value isn't a taxable event. You only report cryptocurrency on your tax return when you sell it, trade it for another crypto, use it to buy goods or services, or receive it as income (mining, staking, airdrops, payment for services). Holding gains aren't taxed until you realize them. However, you must still answer "Yes" to the digital asset question on Form 1040 if you had any transactions during the year.

Q6: What if I forgot to include income on Schedule 1 and already filed my return?

You should file an amended return (Form 1040-X) as soon as you discover the error. Attach a corrected Schedule 1 showing the additional income. If you owe additional tax, filing the amended return promptly can reduce penalties and interest. The IRS matches third-party reports (like 1099 forms) to your return, so unreported income will likely be caught anyway—it's better to correct it yourself first.

Q7: Are there any income limits for Schedule 1 adjustments?

Some adjustments have income limits while others don't. Student loan interest and IRA deductions phase out at higher incomes. However, adjustments like educator expenses, HSA contributions (within contribution limits), half of self-employment tax, and self-employed health insurance have no income phaseout—high earners can still claim them if they qualify. Each adjustment has specific rules detailed in the Schedule 1 instructions at IRS.gov/Form1040.

For complete instructions and current forms, visit IRS.gov/Form1040 or consult a tax professional for personalized advice.