Although Form 1040 is the most commonly referred-to form during tax time, most taxpayers have additional forms, or schedules, to accompany their federal tax returns. One of these forms is Schedule 1 (Form 1040), which outlines different types of income not reported on Form 1040, as well as additional adjustments to income.

Capital gains, alimony, unemployment payments, and gambling winnings are reported on Schedule 1. Also included on Schedule 1 are some common adjustments to income, like student loan interest deductions and deductions for educator expenses.

What is IRS Form 1040 Schedule 1?

Prior to the redesign of Form 1040 in 2018, it had several lines for reporting various income types, with a catchall line for "Other Income." It also had several lines for adjustments to income, also known as "above-the-line" deductions.

Among the income types listed on Schedule 1, you'll find capital gains, unemployment payments, and winnings from gambling. The 1040 only allows you to enter common types of income. W-2 wages, taxable interest, qualified dividends, Social Security benefits, and payments from IRAs, pensions, and annuities all fall under this category.

Reporting any other income types and adjustments to income didn't disappear - that reporting has simply moved to Form 1040 Schedule 1.

example of irs form schedule 1 for form 1040

How should I fill out an IRS Schedule 1?

Schedule 1 consists of two parts: Additional Income and Adjustments to Income, or deductions.

You should first fill out any numbers that apply to you in the Additional Income section (lines 1 through 9). Some forms will provide you with numbers to enter here, such as the Form 1099-G for unemployment compensation.

Follow the same procedure for Adjustments to Income (lines 10-22). There may also be numbers on tax forms you can report here, such as a Form 1098-E if you paid interest on a student loan.

After you have finished these two sections, add up the numbers and record the results on Form 1040.

Part I – Additional Income

Schedule 1 includes information about the following types of income:

  • State and local tax refunds
  • Alimony received
  • Income or loss from a business
  • Gains or losses from sales of business property
  • Rent and royalty income
  • Income from a partnership, S corporation, or trust
  • Farm income or loss
  • Unemployment compensation

example of irs form schedule 1 part 1 part i

As of 2021, Schedule 1 lines 8 through 12 are the catchalls for other types of income that don't fit into the predefined lines, such as gambling winnings and prizes.

There are some items on Schedule 1 that require an additional form or schedule. For example, if you had income or losses from a business, you would also need to attach Schedule C, which lists your business income and losses. To report rent or royalties, you will also need to attach Schedule E.

Part II – Adjustments to Income

Part II of Schedule 1 contains adjustments to income. These include:

  • Unreimbursed expenses up to $250 for educators working in schools
  • Business expenses of military reservists, performing artists, and fee-based government officials
  • Contributions to health savings accounts (HSAs)
  • Moving expenses for members of the Armed Forces
  • The deductible part of self-employment taxes
  • Contributions to a SEP, SIMPLE, or qualified retirement plan
  • Health insurance premiums for self-employed people
  • Penalties on early withdrawals of savings
  • Alimony payments
  • Contributions to an IRA
  • Up to $2,500 of student loan interest
  • Up to $4,000 of qualified higher education tuition and fees

example of irs form schedule 1 part 2 part ii

For many taxpayers, these deductions make sense. By reducing your adjusted gross income through these deductions, you are able to take advantage of other deductions and tax credits with income limits.

Why do I have to file an IRS Schedule 1?

Schedule 1 will not be required for everyone. By trimming down the old Form 1040, the goal was to simplify the form and make it easier for people to add schedules as they need them.

In the event that any of the situations listed on IRS Schedule 1 apply to you, you must file the form. You may need to submit Schedule 1 along with your 1040 when you file your federal income tax return if you want to claim an adjustment to income that's not listed on the main Form 1040, or if you received a type of income that's not listed on the 1040.

It is important to keep in mind that some items on Schedule 1 may also mean filing additional forms. If you have business income, for example, you need to attach Schedule C or C-EZ. If you receive income from an S corporation, you must also file Schedule E, Supplemental Income and Loss. You must also file Schedule F if you're a farmer and have income or a loss.

Should you file Form 1040 Schedule 1?

Schedule 1 is not required to be attached to every federal income tax return. IRS simplified and streamlined the old Form 1040, allowing users to add on forms as needed.

Schedule 1 is only required if you have any of the additional types of income or adjustments to income noted above.

You should ask your tax preparer if you need to file Schedule 1 and how much it will cost to prepare it for you.
 

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