Form 1040 Schedule 1: What it is, how to fill it out & expat guide (2026)

Written by  Ines Zemelman, founder and President at TFX

Last updated Jun 12, 2026

Schedule 1 (Form 1040) is a supplemental IRS form that US taxpayers attach to Form 1040 to report additional income not listed on the main return and to claim above-the-line deductions that reduce Adjusted Gross Income (AGI).

The IRS introduced Schedule 1 in its current two-part format in 2018, when Form 1040 was redesigned under the Tax Cuts and Jobs Act.

Schedule 1 (Form 1040) – Key facts for tax year 2025

• Form type: supplemental attachment to Form 1040
• Part I (lines 1–10): additional income not on main Form 1040
• Part II (lines 11–26): above-the-line deductions that reduce AGI
• Line 10 total → transfers to Form 1040, line 8
• Line 26 total → transfers to Form 1040, line 10
• FEIE (Form 2555): enters Schedule 1 line 8d as a negative amount ($130,000 max for 2025)
• Schedule 1-A: a separate new OBBBA form, not an update to Schedule 1; total transfers to Form 1040 line 13b
• Expat filing deadlines: June 15, 2026 (automatic 2-month extension, if you qualify) / October 15, 2026 (file Form 4868 by June 15, 2026; filing only).

What is Schedule 1 on Form 1040?

Schedule 1 (Form 1040) has two parts.

Part I reports additional income that does not fit on the main Form 1040. Part II reports above-the-line deductions that reduce Adjusted Gross Income before the standard or itemized deduction is applied.

The form was introduced in its current format in 2018 with the TCJA redesign of Form 1040.

Schedule 1 is the "Additional Income and Adjustments to Income" worksheet that feeds two specific lines on Form 1040.

A useful way to think about the meaning of 1040 Schedule 1: it is a worksheet that catches income types and deductions that Form 1040 itself has no room for, then routes the totals back to the main return in two specific places.

For a refresher on how the main return is organized, see our guide to Form 1040.

Who needs to file Schedule 1?

A US taxpayer attaches Schedule 1 to Form 1040 when the return includes any income type listed in Part I (lines 1–10) or any deduction listed in Part II (lines 11–26).

Taxpayers whose income consists only of wages, interest, dividends, retirement distributions, Social Security benefits, or capital gains, and who have no above-the-line deductions, do not file Schedule 1.

The following common income items may require Part I of Schedule 1:

1. Self-employment or business income (reported on Schedule C, then entered on line 3).
2. Rental, royalty, partnership, or S-corporation income (reported on Schedule E, then entered on line 5).
3. Unemployment compensation (generally amounts received under US federal or state unemployment laws and related programs) (line 7).
4. Taxable state or local tax refunds (line 1), only if you itemized deductions in the prior year.
5. Alimony received under divorce agreements dated on or before December 31, 2018 (line 2a). Alimony under post-2018 agreements is not taxable and is not reported on Schedule 1.
6. Other income: gambling winnings, prizes, digital asset ordinary income, and other items reported on line 8 or in the entry space at the top of Schedule 1; foreign pension distributions go on Form 1040 lines 5a and 5b.

The following common deductions and adjustments may require Part II of Schedule 1:

1. Self-employment tax deduction: 50% of SE tax calculated on Schedule SE (line 15).
2. Self-employed health insurance premiums (line 17).
3. Contributions to SEP, SIMPLE, or qualified retirement plans (line 16).
4. Health Savings Account (HSA) contributions (line 13). The 2025 limits are $4,300 self-only and $8,550 family, and Form 8889 is required.
5. Student loan interest, up to $2,500 (line 21).
6. IRA contribution deduction, up to $7,000 ($8,000 if aged 50+) for tax year 2025 (line 20).

Part I: Additional income (Lines 1–10)

Part I of Schedule 1 captures 9 categories of additional income that do not appear on the main Form 1040. The sum of lines 1–9 flows to line 10, which then transfers to line 8 of Form 1040 and increases your total income.

Schedule 1 Part I: Line-by-line breakdown

9 income categories flow into line 10, which then transfers to Form 1040 line 8 and increases your total income.

Line 8v captures digital asset income received as ordinary income, including staking rewards, mining income, and hard fork proceeds.

Capital gains from selling cryptocurrency are not reported on Schedule 1. Those go on Schedule D.

For 2025, Form 1099-K is generally required only when business transactions exceed $20,000 and the total number of transactions exceeds 200. Most casual crypto users will not receive a 1099-K, but the income is still reportable on line 8v regardless of whether a form is issued.

For a fuller picture of how foreign-source income maps onto the rest of the return, see our guide on where to report foreign income on Form 1040.

Part II: Adjustments to income (Lines 11–26)

Part II of Schedule 1 lists above-the-line deductions, the adjustments that reduce Adjusted Gross Income before the standard or itemized deduction is applied.

These deductions are available regardless of whether you itemize. The total of lines 11–25 flows to Schedule 1, line 26, which transfers to line 10 of Form 1040.

This distinction matters because above-the-line adjustments to income from Schedule 1 lower AGI, which in turn controls eligibility for many credits and phase-outs further down the return.

Compare this with itemized deductions, which work very differently, in our breakdown of Schedule A: itemized deductions vs. above-the-line deductions for US expats.

Schedule 1 Part II: Line-by-line breakdown

Above-the-line deductions on lines 11–25 sum to Schedule 1 line 26, which then reduces AGI on Form 1040 line 10 – available even if you take the standard deduction.

Line 24j is available exclusively to self-employed US expats who claim the Foreign Housing Deduction on Form 2555.

The deduction applies to eligible housing costs above the 2025 base amount of $20,800, which is 16% of the maximum FEIE. The housing deduction is limited by your qualified housing expenses, the base housing amount, and the location-specific limit in the Form 2555 instructions.

The IRS Publication 970 covers the income phase-out and qualifying-loan rules for the student loan interest deduction reported on line 21, which is available even to expats who do not itemize.

If you owe self-employment tax on foreign earnings, our Schedule SE: self-employment tax guide for expats (2026) walks through the calculation that feeds line 15.

Schedule 1 and Form 1040 – How the totals connect

Schedule 1 feeds two specific lines on Form 1040.

The Part I total (Schedule 1 line 10) transfers to Form 1040 line 8 and increases total income. The Part II total (Schedule 1 line 26) transfers to Form 1040 line 10 and reduces Adjusted Gross Income.

Schedule 1 connects to Form 1040 at exactly two points – one that adds to income, one that subtracts from it.

For self-employed expats, the most common Part I entries are on Schedule 1, lines 3 and 6 (Schedule C business income and, less often, Schedule F farm income).

On the deduction side, taxpayers sometimes search for a single IRS Form 1040 Schedule 1 total of lines 16 to 20, expecting that retirement-plan and IRA deductions roll up into a combined subtotal. They do not.

Line 16 (self-employed retirement plans) and line 20 (IRA deduction) are separate entries, each carried into line 26 total alongside every other Part II item.

Schedule 1 for US expats – Expat-specific rules

US expats interact with Schedule 1 differently from domestic filers.

The Foreign Earned Income Exclusion (Form 2555), the Foreign Housing Deduction, and foreign pension income all flow through this form. Schedule 1 is the technical bridge between expat-specific forms and the main Form 1040.

How FEIE interacts with Schedule 1

The Foreign Earned Income Exclusion (FEIE), calculated on Form 2555, enters Schedule 1 as a negative amount on line 8d with the notation "Form 2555".

This negative entry reduces the Part I total and flows to Form 1040 line 8, decreasing total income. For tax year 2025, the maximum FEIE is $130,000 per qualifying person (Rev. Proc. 2024-40).

TFX client scenario: A US software consultant living in Germany earned $140,000 in salary in 2025. After claiming the full FEIE ($130,000, Form 2555), Schedule 1 line 8d showed –$130,000 (Form 2555), reducing the Part I total. The client additionally deducted SE tax (line 15) and an IRA contribution (line 20) in Part II, bringing AGI close to zero before applying the standard deduction.

For the qualifying tests and a full Form 2555 walkthrough, see Foreign Earned Income Exclusion (FEIE): Complete guide 2026.

Foreign housing deduction on Schedule 1 (line 24j)

Self-employed US expats who claim the Foreign Housing Deduction on Form 2555 report the deductible amount on Schedule 1, line 24j.

The deduction covers eligible housing costs above the 2025 base amount of $20,800 and is capped by IRS location-specific limits published in the Form 2555 instructions.

Rent and lease-required costs qualify; mortgage principal, telephone, internet, and domestic labor do not.

W-2 employees living abroad claim the housing benefit as an exclusion on Form 2555. It does not appear on Schedule 1 line 24j.

Line 24j applies only to self-employed expats claiming the housing deduction. Claiming line 24j on a W-2 return creates an incorrect double benefit and is one of the most common expat Schedule 1 errors.

The location-specific maximum housing amounts for 2025 are published in the Form 2555 instructions.

Foreign pensions and Schedule 1

Distributions from foreign pension plans are generally taxable as US ordinary income and are reported on Form 1040 lines 5a and 5b, not on Schedule 1 line 8.

Foreign pension or annuity income may still be taxable even if no Form 1099 or similar document is issued. You may need to determine the taxable part yourself and report it on Form 1040, lines 5a and 5b.

The applicable US income tax treaty determines whether a foreign pension is partially or fully exempt from US tax. The mechanics vary significantly by treaty, pension type (lump sum vs. periodic, government vs. private), and the taxpayer's country of residence.

Some treaty-based return positions must be disclosed on Form 8833; check the IRS rules for your specific treaty claim.

If you remain liable for US tax on a foreign pension but also pay foreign tax on it, our Foreign Tax Credit guide covers how to use Form 1116 to avoid double taxation.

Schedule 1 vs Schedule 1-A: Key differences

Schedule 1-A (Additional Deductions) is a new, separate IRS form introduced for the 2025 tax year under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.

Despite the similar name, Schedule 1-A (Form 1040) is not a replacement or update to Schedule 1. It is a distinct form for four temporary deductions that apply only to tax years 2025 through 2028.

Schedule 1 is a permanent AGI-reduction form; the Schedule 1-A tax form is a temporary (2025–2028) taxable-income reduction form. The two forms serve different parts of the tax calculation, and both can be filed together on the same return.

Schedule 1 is permanent and reduces AGI; Schedule 1-A is temporary (2025–2028) and reduces taxable income after AGI.

The Schedule 1-A IRS form contains the following 4 deductions for tax years 2025–2028:

1. Qualified tip income: up to $25,000; phases out for MAGI above $150,000 single / $300,000 MFJ.
2. Qualified overtime compensation: up to $12,500 single / $25,000 MFJ; same phase-out thresholds as tips.
3. Passenger vehicle loan interest: up to $10,000 for new qualifying vehicles, with VIN required on the return.
4. Enhanced senior deduction: $6,000 per qualifying person aged 65+ ($12,000 MFJ if both qualify); phases out at $75,000 single / $150,000 MFJ MAGI, fully eliminated at $175,000 / $250,000.

If you also need to understand the other end of the return, our IRS Form 1040 Schedule 2 guide covers the form that handles additional taxes owed.

How to fill out Schedule 1 – Step by step

Schedule 1 is completed in sequence: Part I first (additional income, lines 1–10), then Part II (above-the-line deductions, lines 11–26).

Supporting schedules – Schedule C for business income, Schedule E for rental income, Schedule SE for self-employment tax – must be completed before entering totals on Schedule 1. These Schedule 1 instructions below walk through the full sequence for a self-employed expat claiming FEIE.

TFX client scenario: A US freelance designer in Spain with $85,000 of 2025 net Schedule C income used Schedule 1 lines 3, 15, 16, and 17 to reduce AGI through the SE tax deduction, a SEP-IRA contribution, and self-employed health insurance premiums, before applying FEIE on line 8d. The combined Part II adjustments reduced AGI by roughly $20,000 before the FEIE entry on line 8d brought the rest of the foreign earnings out of taxable income.

The following 10 steps cover the complete Form 1040 Schedule 1 instructions for a US expat with self-employment income and FEIE:

1. Gather all source documents: Form 1099s, foreign income statements, exchange rate records, Schedule C/E drafts, and Form 2555 if claiming FEIE.
2. Convert all foreign-currency amounts to USD. The IRS publishes yearly average currency exchange rates that taxpayers may use for converting foreign-currency income. Document the conversion method and rates used.
3. Complete Schedule C if you have self-employment income. Enter net profit on Schedule 1, line 3.
4. Complete Schedule E if you have rental, royalty, or pass-through income. Enter the net amount on Schedule 1, line 5.
5. Enter all other Part I income on the applicable lines (1, 2a, 4, 6, 7, 8 and sub-lines 8a–8z).
6. If claiming FEIE via Form 2555, enter the exclusion as a negative amount on line 8d with the notation "Form 2555." Report gross worldwide income first; do not simply omit it.
7. Calculate Schedule 1, line 10 (sum of lines 1–9), and transfer it to Form 1040, line 8.
8. Complete Part II: enter each applicable deduction on lines 11–25. Complete Form 8889 before entering the HSA amount on line 13.
9. If claiming the Foreign Housing Deduction (Form 2555, self-employed filers only), enter the deductible amount on line 24j.
10. Calculate line 26 (sum of lines 11–25), transfer it to Form 1040 line 10, then attach Schedule 1-A separately if any OBBBA deduction applies.

For a deeper look at filing mechanics from the self-employment side, see how to file taxes as a self-employed contractor living abroad.

Common Schedule 1 mistakes to avoid

The 5 most common Schedule 1 (Form 1040) errors for US expats involve FEIE gross income omission, currency conversion, self-employment tax on excluded income, the W-2 vs. self-employed housing treatment, and Schedule 1 vs. Schedule 1-A confusion.

The following 5 errors appear most frequently on expat Schedule 1 returns:

1. Omitting gross foreign income before FEIE. Report full worldwide income on the relevant Part I lines first, then apply FEIE as a negative on line 8d. Reporting only the net post-exclusion amount contradicts IRS instructions and can trigger compliance issues.

2. Currency conversion errors. Convert all foreign-currency income to USD using IRS-published yearly average exchange rates or another reasonable method consistently applied. Document the conversion rate and source.

IRS auditors may request evidence of the method used. The distinction between K-1 and 1099 income reporting, including currency considerations, is covered in our guide on K-1 vs 1099: what's the difference for US expats.

3. Missing SE tax on FEIE income. The FEIE eliminates federal income tax on excluded earnings but does not reduce self-employment tax (15.3%). A self-employed expat who excludes $100,000 in net earnings via FEIE still owes SE tax on the foreign self-employment income and must claim the 50% SE deduction on Schedule 1, line 15.

4. W-2 employees claiming line 24j. Salaried expats receive the housing benefit as an exclusion on Form 2555, not as a deduction on Schedule 1, line 24j. Only self-employed expats use line 24j. Claiming it on a W-2 return creates an incorrect double benefit.

5. Confusing Schedule 1 (1040) with Schedule 1-A. Schedule 1 Part II deductions reduce AGI (above-the-line). Schedule 1-A deductions reduce taxable income after AGI. The Schedule 1-A total flows to Form 1040 line 13b, not to Schedule 1.

Filing deadlines for US expats

Schedule 1 follows the Form 1040 deadlines – April 15 for residents, June 15 for qualifying expats abroad, October 15 if Form 4868 is filed by June 15, 2026 (filing only, not payment).

Schedule 1 is filed as an attachment to Form 1040 and shares the same deadlines. It does not have a separate due date.

Expats who qualify for the automatic 2-month extension have until June 15, 2026 to pay without a late-payment penalty, but interest on any unpaid balance generally runs from April 15, 2026. The further extension to October 15 via Form 4868 covers filing only, not payment.

Publication 54 sets out the automatic two-month extension available to US citizens and resident aliens whose tax home and abode are both outside the United States on the regular due date.

For an overview of every form an expat may need to file alongside Schedule 1, see our complete guide to all US tax forms for expats in 2026.

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