What Is Schedule 1 for Taxes? Additional Income & Adjustments

The U.S. federal income tax system relies on various forms to accurately capture an individual’s financial picture. Form 1040 serves as the primary document for reporting income, deductions, and calculating tax liability. While the main Form 1040 covers common income sources like wages and interest, many taxpayers have additional financial activities not directly accounted for on its initial lines. For these situations, supplementary schedules are necessary to provide a comprehensive tax return. Schedule 1 is one such form, designed to report specific types of income and adjustments that extend beyond the basic reporting on Form 1040.

Understanding Schedule 1

Schedule 1, officially titled “Additional Income and Adjustments to Income,” functions as an extension of the main Form 1040. Its primary purpose is to capture income sources and deductions that are not reported on lines 1 through 8 of Form 1040. This form helps simplify the primary tax return by offloading less common, yet still important, financial details.

Schedule 1 is divided into two parts: Part I reports additional income, and Part II claims adjustments to income. Totals from Schedule 1 flow directly onto specific lines of Form 1040. For example, additional income transfers to Form 1040, line 8, and total adjustments to Form 1040, line 10. This ensures all relevant income and deductions are included in the final tax calculation.

Reporting Additional Income

Part I of Schedule 1 details income types not reported on Form 1040. This includes income from sources beyond typical wages, salaries, or standard interest and dividend income.

Common additional income includes taxable refunds, credits, or offsets of state and local income taxes. If a taxpayer itemized deductions previously and received a state or local income tax refund, it might be taxable. Alimony received under agreements executed before January 1, 2019, is also reported here. Alimony from agreements on or after this date is generally not taxable for the recipient.

Business income or loss from self-employment, including freelance or gig work, is reported on Schedule 1, with details on Schedule C. Capital gains or losses from asset sales, typically on Schedule D, are reflected here. Other gains or losses from business property sales, calculated on Form 4797, also flow to this section.

Income or loss from rental real estate, royalties, partnerships, S corporations, and trusts are reported on Schedule 1, often with details on Schedule E. Farm income or loss, typically on Schedule F, is also included. Unemployment compensation is another common income type reported here. Other miscellaneous income not listed elsewhere on Form 1040 or Schedule 1 is reported under “Other income,” including jury duty pay, prizes, awards, or gambling winnings.

Claiming Adjustments to Income

Part II of Schedule 1 allows taxpayers to claim specific adjustments to income, often called “above-the-line” deductions. These deductions are subtracted from gross income to arrive at Adjusted Gross Income (AGI) on Form 1040. Claiming these adjustments can lower a taxpayer’s AGI, impacting eligibility for certain tax credits and other deductions.

Eligible educators can deduct unreimbursed classroom costs. For 2024, the maximum deduction is $300, or $600 for married couples filing jointly where both are eligible educators, with each spouse claiming up to $300. This applies to teachers, instructors, counselors, principals, or aides working at least 900 hours in a K-12 school. Certain business expenses of reservists, performing artists, and fee-basis government officials are also deductible.

Contributions to a Health Savings Account (HSA) are deductible, reducing taxable income. For 2024, the annual contribution limit is $4,150 for self-only coverage and $8,300 for family coverage, with an additional $1,000 catch-up contribution for those age 55 or older. Moving expenses are generally deductible only for active duty Armed Forces members who move due to a permanent change of station. This deduction covers unreimbursed costs for moving household goods, personal effects, and travel.

The deductible part of self-employment tax, which is half of the tax paid, is an adjustment. Self-employed individuals can also deduct health insurance premiums, including medical, dental, and long-term care, if they had a net business profit and were not eligible for other health plans. Contributions to self-employed retirement plans, such as SEP, SIMPLE, and qualified plans, are also deductible.

A penalty for early withdrawal of savings, often on Form 1099-INT, can be deducted. Alimony paid under divorce or separation agreements executed before January 1, 2019, is deductible by the payer; for agreements on or after this date, it is not. Traditional IRA contributions may be deductible depending on income and workplace retirement plan coverage. The student loan interest deduction allows taxpayers to deduct the lesser of $2,500 or the interest paid on a qualified loan, phasing out at higher Modified Adjusted Gross Income (MAGI) levels. Other less common adjustments are also reported here.