When filing your federal tax return using IRS Form 1040, you may encounter situations that require reporting income or deductions not included directly on the main form. That’s where Schedule 1 (Form 1040) – Additional Income and Adjustments to Income comes in. This important supplemental form allows taxpayers to report a wide range of income sources and adjustments that affect their Adjusted Gross Income (AGI), and ultimately, the amount of tax owed or refunded.
What Is Schedule 1 Used For?
Schedule 1 is divided into two primary sections:
- Part I – Additional Income: Includes income not listed on lines 1–8 of Form 1040, such as unemployment compensation, rental income, or gambling winnings.
- Part II – Adjustments to Income: Lists “above-the-line” deductions such as student loan interest, educator expenses, HSA contributions, or self-employed retirement contributions.
Understanding Schedule 1 is crucial because both the additional income and adjustments flow into your Form 1040 and affect your taxable income and eligibility for various tax credits.
Who Needs to File Schedule 1?
You must file Schedule 1 if you have:
- Income sources not listed on the main Form 1040
- Adjustments to income (deductions) that reduce your AGI
Many freelancers, gig workers, landlords, retirees, and investors will need Schedule 1 at some point.
Part I – Additional Income (Lines 1–9)
This section includes various forms of income that don’t have dedicated lines on Form 1040:
- Line 1: Taxable refunds of state/local income taxes
- Line 2a: Alimony received (for divorces finalized before 2019)
- Line 3: Business income (attach Schedule C)
- Line 4: Other gains or losses (attach Form 4797)
- Line 5: Rental real estate, royalties, partnerships, S corporations, trusts (attach Schedule E)
- Line 6: Farm income (attach Schedule F)
- Line 7: Unemployment compensation (reported on Form 1099-G)
- Line 8: Other income, including jury duty pay, gambling winnings, prizes, canceled debts, etc.
- Line 9: Total additional income
Each of these lines may require a supporting form or worksheet to be attached with your return.
Part II – Adjustments to Income (Lines 10–26)
This section allows you to deduct certain expenses that reduce your AGI—often called “above-the-line deductions.” These are available even if you don’t itemize deductions on Schedule A.
- Line 10: Educator expenses (up to $300 per eligible teacher)
- Line 11: Certain business expenses of reservists, performing artists, and fee-basis government officials
- Line 12: Health Savings Account (HSA) contributions (attach Form 8889)
- Line 13: Moving expenses for members of the Armed Forces (attach Form 3903)
- Line 14: Deductible part of self-employment tax (from Schedule SE)
- Line 15: Self-employed SEP, SIMPLE, and qualified plans
- Line 16: Self-employed health insurance deduction
- Line 17: Penalty on early withdrawal of savings (e.g., from a CD)
- Line 18: Alimony paid (for pre-2019 agreements)
- Line 19: IRA deduction (Traditional IRAs)
- Line 20: Student loan interest deduction (up to $2,500)
- Line 21: Tuition and fees deduction (if eligible and extended by Congress)
- Lines 22–25: Other less common adjustments (e.g., jury duty repaid to employer, reforestation amortization)
- Line 26: Total adjustments to income
Once completed, the total from line 9 (additional income) and line 26 (adjustments) are transferred to lines 8 and 10 of your Form 1040 respectively.
How Schedule 1 Affects Your Tax Return
The amounts from Schedule 1 feed directly into your Form 1040:
- Line 8 of Form 1040: Additional income from Schedule 1
- Line 10 of Form 1040: Adjustments to income from Schedule 1
By increasing or decreasing your Adjusted Gross Income (AGI), Schedule 1 can affect your eligibility for deductions, tax credits (such as the Child Tax Credit or Education Credits), and even your net refund or amount due.
Common Scenarios That Require Schedule 1
- You received unemployment compensation (reported on Form 1099-G)
- You worked as a freelancer or gig worker (income reported on Schedule C)
- You paid interest on a student loan
- You contributed to an HSA or SEP IRA
- You received alimony from a pre-2019 divorce decree
- You have rental property income (reported via Schedule E)
Tips for Filing Schedule 1 Correctly
- Use tax software that automatically includes Schedule 1 if needed
- Double-check your Forms 1099-NEC, 1099-G, and 1099-K for income sources
- Maintain records for deductions like student loan interest and IRA contributions
- Attach supporting forms (e.g., Schedule C, Schedule E) as required
- Consult a tax professional for complicated scenarios like royalty income or multi-year adjustments
Conclusion
Schedule 1 is an essential component of the modern Form 1040 filing process, capturing many types of income and deductions that don’t appear directly on the main return. Understanding how to properly use this form can help you comply with tax regulations and potentially lower your taxable income. Whether you’re a self-employed professional, a landlord, or someone with educational or medical-related adjustments, Schedule 1 can significantly impact your final tax liability or refund. When in doubt, consult a tax advisor to ensure accurate and complete filing.
