2018 Form 1040 Schedule 1 Checklist: additional income and Adjustments to Income
Form 1040 was redesigned in 2018, with Forms 1040A and 1040EZ eliminated and consolidated into a simplified main Form 1040. Schedule 1 consolidates all additional income sources reported on Lines 10 through 21 and adjustments to income reported on Lines 23 through 35 that no longer appear on the simplified main Form 1040. The Tax Cuts and Jobs Act changes include suspending personal exemptions, increasing the child tax credit to $2,000, and limiting the state and local tax deduction to $10,000. This has increased the prevalence of Schedule 1 filings among taxpayers with income beyond wages, interest, dividends, and Social Security benefits.
Year-Specific Programs Affecting 2018
The individual shared responsibility payment under the Affordable Care Act health insurance mandate applied only to the 2018 tax year, as it was reduced to zero beginning in 2019. The Tax Cuts and Jobs Act limited the state and local tax deduction to $10,000 per return, affecting adjusted gross income calculations on Schedule 1 by limiting deductible amounts for taxpayers itemizing on Schedule A. These changes significantly altered the tax landscape for 2018 and required careful attention to new limitations and thresholds.
Comprehensive Ten-Step Filing Process
Step 1: Gather Additional Income Documents
Collect all Forms 1099, including 1099-MISC for miscellaneous income, 1099-G for unemployment compensation and state income tax refunds, 1099-DIV for dividends, and 1099-INT for interest income. Gather state income tax refund documentation if you received a refund of state or local income taxes that you deducted in a prior year.
Obtain alimony received statements for divorce or separation agreements executed before 2019, as alimony reporting rules changed for agreements executed after December 31, 2018. Verify Box 1 on Form 1099-G matches the unemployment compensation amount to report on Line 19.
Step 2: Complete and Attach Schedule C for Business Income
If reporting business income or loss on Line 12, complete Schedule C (Form 1040) showing your business’s gross receipts or sales, cost of goods sold if applicable, business expenses by category, and net profit or loss. Transfer the net profit or loss from Schedule C Line 31 to Schedule 1 Line 12. Schedule C is required for all self-employed individuals operating as sole proprietors, independent contractors, or single-member LLCs not electing corporate taxation. Ensure all business expenses are ordinary and necessary for your trade or business and properly documented with receipts and records.
Step 3: Complete and Attach Schedule D for Capital Gains or Losses
For capital gains or losses on Line 13, complete Schedule D (Form 1040) if you have multiple capital asset transactions or a capital loss carryover from prior years, or if the transaction requires detailed reporting beyond a simple capital gain distribution. If Schedule D is not necessary because you only have capital gain distributions from mutual funds or other regulated investment companies shown on Form 1099-DIV, check the box on Line 13 instead of attaching Schedule D. Report the capital gain distribution amount on the appropriate line of Schedule 1.
Step 4: Complete Form 4797 for Other Gains or Losses
Report gains or losses from sales of business property on Line 14 using Form 4797 only if applicable to your return. Form 4797 captures gains and losses from the sale or exchange of property used in a trade or business, including depreciation recapture under Section 1245 or Section 1250. This form is required for sales of business equipment, business vehicles, rental property, and other property not held primarily for sale to customers. The net gain or loss from Form 4797 flows to Schedule 1 Line 14.
Step 5: Complete and Attach Schedule E for Rental, Royalty, or Partnership Income
For rental real estate income, royalties, or income from partnerships, S corporations, estates, trusts, or REMICs reported on Line 17, complete and attach Schedule E (Form 1040). Schedule E Part I reports rental real estate and royalty income with detailed income and expense reporting for each property. Part II reports income from partnerships and S corporations using Schedule K-1 forms received from these entities. Part III reports income from estates and trusts. The total net rental income or loss, as well as pass-through income, is reported on Schedule 1, Line 17.
Step 6: Complete and Attach Schedule F for Farm Income or Loss
If reporting farm income or loss on Line 18, complete and attach Schedule F (Form 1040). Schedule F is used by sole proprietors and single-member LLCs engaged in farming operations to report income from the production of crops, livestock, poultry, fish, or other agricultural products. Report gross income from all farm sources, subtract allowable farm expenses, and transfer the net farm profit or loss from Schedule F Line 34 to Schedule 1 Line 18.
Step 7: Document and Report Adjustments to Income
Educator expenses reported on Line 23 require the collection of receipts for unreimbursed K-12 educator expenses, including teaching supplies, professional development, classroom equipment, technology, personal protective equipment, and disinfectant. The maximum deduction is $300 per eligible educator ($600 if married filing jointly with both spouses eligible, but not more than $300 each). Eligible educators must work at least 900 hours per school year in a school that provides elementary or secondary education, as determined under state law.
Health savings account deduction on Line 25 requires completion of Form 8889 to calculate the allowable HSA contribution deduction based on your HSA-eligible high-deductible health plan coverage, contribution limits, and any employer contributions. Armed Forces moving expenses on Line 26 require completion of Form 3903 if you are a member of the Armed Forces on active duty moving pursuant to a military order for a permanent change of station. Certain business expenses for reservists, performing artists, and fee-basis government officials on Line 24 require completion of Form 2106 to substantiate unreimbursed employee business expenses.
Step 8: Calculate and Report Self-Employment Tax Deduction
Complete Schedule SE (Form 1040) to determine your net self-employment earnings subject to self-employment tax. The self-employment tax consists of Social Security and Medicare taxes for individuals who work for themselves. Report one-half of your self-employment tax, which represents the employer-equivalent portion, on Line 27 only. This amount must match the amount on Line 6 of Schedule SE.
This deduction is allowed because employees have their employer pay half of Social Security and Medicare taxes. In contrast, self-employed individuals pay the full amount but are entitled to a deduction of half of it.
Step 9: Determine IRA Deduction Eligibility Using 2018 Thresholds
Suppose you or your spouse were covered by a workplace retirement plan at any time during 2018. In that case, your traditional IRA deduction begins to phase out at modified adjusted gross income thresholds specific to 2018. For single filers covered by a workplace plan, the phaseout starts at $63,000 and ends at $73,000. For married filing jointly with the spouse making the contribution covered by a workplace plan, the phaseout begins at $101,000 and ends at $121,000.
If a workplace plan does not cover you but your spouse is, your deduction phases out between $189,000 and $199,000 of modified adjusted gross income. Use the IRA Deduction Worksheet provided in the Schedule 1 instructions to calculate your allowable deduction and enter the result on Line 32.
Step 10: Calculate Totals and Transfer to Form 1040
Sum all additional income reported on Lines 10 through 21 and enter the total on Line 22. Transfer this total to Form 1040 Line 6 as extra income. Sum all adjustments to income reported on Lines 23 through 35 and enter the total on Line 36. This total is used to calculate adjusted gross income by subtracting Schedule 1, Line 36, from Form 1040, Line 6, with the result appearing on Form 1040, Line 7, as adjusted gross income.
Sign and date Schedule 1 if required by the instructions. Attach all required supporting schedules, including Schedule C, Schedule D, Schedule E, Schedule F, Form 4797, Form 2106, Form 8889, and Form 3903, before filing the complete return.
Key Line Changes for 2018
The 2018 form redesign represented a fundamental restructuring of Form 1040. All additional income and adjustments to income previously reported on the main Form 1040 are now moved to Schedule 1 as part of this redesign. Items such as educator expenses reported on Line 23, self-employment tax deduction on Line 27, and IRA deduction on Line 32, which were previously listed on the main Form 1040, now require attachment to Schedule 1.
Several line numbers, including Lines 1 through 9b, Lines 15 and 16, Line 20, and Line 35, are reserved, reflecting the simplified structure that eliminated Forms 1040A and 1040EZ and consolidated all individual income tax reporting onto Form 1040 with targeted schedules.
Form-Specific Limitations
Nonresident aliens cannot claim the standard deduction and must itemize deductions on Schedule A. Schedule 1 adjustments for nonresident aliens are subject to limitations under Internal Revenue Code Section 873 and applicable tax treaty restrictions. Specific adjustments, such as the student loan interest deduction and tuition and fees deduction, may not be available to nonresident aliens or may be limited based on treaty provisions. Taxpayers should review Publication 519 (U.S. Tax Guide for Aliens) to determine which adjustments are allowable based on their residency status and any applicable tax treaties.
Conclusion
Completing Schedule 1 for the 2018 tax year requires careful gathering of all additional income documentation, proper completion of supporting schedules for business income, rental income, farm income, and capital gains, accurate calculation of adjustments to income including educator expenses, HSA deductions, self-employment tax deduction, and IRA contributions, and correct transfer of totals to Form 1040 for adjusted gross income calculation.
Understanding the 2018 form redesign and the consolidation of additional income and adjustments onto Schedule 1 ensures accurate and complete tax reporting while maximizing available adjustments that reduce adjusted gross income and overall tax liability.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
