Glossary of Tax Terms

Every term behind the tips, overtime, car-loan and senior deductions, defined in plain English. Each definition is taken from the IRS source named under it — the same sources the calculators use.

Definitions verified against IRS sources — last verified October 26, 2026

Schedule 1-A Qualified tips Qualified overtime compensation FLSA Regular rate MAGI Phase-out Deduction cap Box 12, Code TT Box 12, Code TP Box 14b TTOC SSTB Form W-2c Form 4852 Reported-amount ceiling Transition year Senior deduction Qualified passenger vehicle loan interest Form 1040, line 13b

Schedule 1-A

The one IRS form where all four new deductions are calculated.

Schedule 1-A (Form 1040) is the IRS form titled “Additional Deductions.” The tips deduction (Part II), overtime deduction (Part III), car-loan interest deduction (Part IV) and senior deduction (Part V) are each worked out on it. The four results are added on line 38, and that total is carried to Form 1040, line 13b. You file it with your return whether or not you itemize.

Where it applies: All four deductions, tax years 2025–2028.
Source: IRS, Schedule 1-A (final form, PDF)

Related: Schedule 1-A Helper · Form 1040, line 13b

Qualified tips

Voluntary tips from customers, earned in a listed tipped occupation.

Tips a customer pays voluntarily — cash or charged, including tips received through a tip-sharing or tip-pooling arrangement — received in an occupation on the IRS tipped-occupation list. Mandatory service charges and automatic gratuities are not tips and do not qualify. Tips must be reported on a Form W-2, a Form 1099, another statement from the payer, or Form 4137 to count.

Where it applies: Tips deduction, up to $25,000 a year — Schedule 1-A, line 13.
Source: IRS Fact Sheet FS-2025-03 (Jul. 14, 2025); Schedule 1-A, Part II

Related: Tips Calculator · TTOC · Code TP

Qualified overtime compensation

The FLSA-required overtime premium — usually the “half” of time-and-a-half.

The premium portion of overtime pay that the Fair Labor Standards Act (FLSA) requires for hours worked over 40 in a workweek. If you are paid time-and-a-half, only the extra “half” counts — not the full overtime wage. Premiums your employer pays voluntarily (for holidays, weekends, or hours the FLSA does not cover) do not qualify, even if they are paid at double time.

Where it applies: Overtime deduction, up to $12,500 ($25,000 joint) — Schedule 1-A, line 21.
Source: IRS Fact Sheet FS-2026-13, Q1, Q12, Q16

Related: Overtime Calculator · FLSA · Regular rate · Code TT

FLSA (Fair Labor Standards Act)

The federal law that requires overtime pay after 40 hours in a week.

The Fair Labor Standards Act is the federal law that makes employers pay at least time-and-a-half for hours over 40 in a workweek. For the overtime deduction, only the premium the FLSA itself requires counts. Salaried employees who are exempt from the FLSA earn no qualified overtime.

Where it applies: Decides which overtime premiums qualify.
Source: IRS Fact Sheet FS-2026-13, Q1, Q16

Regular rate

The base hourly rate used to work out the overtime premium.

Your regular hourly rate of pay for FLSA purposes. The qualified overtime amount is: overtime hours × ½ × regular rate. Example from the IRS: 10 overtime hours at a $20 regular rate, even paid at double time, give a qualified amount of 10 × ½ × $20 = $100.

Where it applies: Overtime deduction calculation.
Source: IRS Fact Sheet FS-2026-13, Q12, Q16

MAGI (modified adjusted gross income)

Your income figure the phase-outs are measured against.

Modified adjusted gross income, for these deductions, is your adjusted gross income with certain foreign-income amounts added back; for most filers it equals their AGI. It is computed on Schedule 1-A, line 3, and every deduction's phase-out compares your MAGI with that deduction's threshold.

Where it applies: All four phase-outs — Schedule 1-A, line 3.
Source: IRS, Schedule 1-A (final form, PDF), line 3

Related: Phase-out · Deduction cap

Phase-out

The income range over which a deduction shrinks to zero.

Each deduction starts to shrink once your MAGI passes its threshold. For tips and overtime the deduction is reduced by $100 for each full $1,000 of excess; for car-loan interest the reduction is $200 per $1,000 and rounds up; for the senior deduction it is 6% of the excess per person. Past the end of the range, the deduction is zero.

Where it applies: Tips/OT threshold $150,000 ($300,000 joint); car loan $100,000 ($200,000); senior $75,000 ($150,000).
Source: IRS, Schedule 1-A (final form, PDF), Parts II–V

Related: MAGI · Deduction cap

Deduction cap

The maximum amount each deduction allows per year.

The most you can deduct in a year, before any phase-out: tips $25,000 per return; overtime $12,500, or $25,000 on a joint return; car-loan interest $10,000; senior deduction $6,000 per eligible person. A cap is a ceiling, not an entitlement — you also need at least that much qualifying income.

Where it applies: Schedule 1-A, Parts II–V.
Source: IRS, Schedule 1-A (final form, PDF)

Related: Phase-out

Box 12, Code TT (overtime)

How qualified overtime is reported on your W-2 from 2026.

From tax year 2026, employers must report the total qualified overtime compensation they paid you in Box 12 of Form W-2 using code TT. For 2026 and later, the amount shown there is the ceiling on your overtime deduction, and only a corrected Form W-2c can change it.

Where it applies: Form W-2, Box 12 — overtime deduction.
Source: IRS Fact Sheet FS-2026-13

Related: W-2 Code Checker · Reported-amount ceiling · Form W-2c

Box 12, Code TP (tips)

How qualified tips are reported on your W-2 from 2026.

From tax year 2026, employers must report qualified tips in Box 12 of Form W-2 using code TP, with your occupation code in box 14b. For 2026 and later, the amount shown there is the ceiling on your tips deduction, and only a corrected Form W-2c can change it.

Where it applies: Form W-2, Box 12 — tips deduction.
Source: IRS Fact Sheet FS-2026-13

Related: W-2 Code Checker · Box 14b · Qualified tips

Box 14b (occupation code)

Where your tipped-occupation code appears on the W-2.

Box 14b of Form W-2 carries your Treasury Tipped Occupation Code (TTOC) — the 3-digit code for your occupation from the IRS list — alongside the code TP amount in Box 12. It tells the IRS which listed occupation your tips were earned in.

Where it applies: Form W-2, box 14b — tips deduction, 2026 and later.
Source: IRS Fact Sheet FS-2026-13

Related: TTOC · Code TP

TTOC (Treasury Tipped Occupation Code)

The IRS code list of occupations that customarily received tips.

The Treasury Tipped Occupation Codes are the official list of occupations that customarily and regularly received tips on or before December 31, 2024. There are 71 occupations in 8 categories. If your occupation is not on the list, its tips do not qualify, no matter how the tips were earned.

Where it applies: Tips deduction eligibility.
Source: IRS, Occupations that customarily and regularly received tips

Related: All 71 occupations · Qualified tips · Box 14b

SSTB (Specified Service Trade or Business)

Fields like health, law and consulting — excluded from the tips deduction.

A Specified Service Trade or Business, as defined in section 199A, is a business in fields such as health, law, accounting, actuarial science, consulting, athletics, financial services, or the performing arts. Tips received in an SSTB do not qualify for the deduction — and that includes employees of an SSTB business, not just its owners.

Where it applies: Tips deduction exclusion.
Source: IRS Fact Sheet FS-2025-03 (Jul. 14, 2025)

Related: Qualified tips · Tips Calculator

Form W-2c

The corrected W-2 — the only fix for a wrong TT or TP amount.

Form W-2c is a corrected wage statement issued by your employer. If your W-2 shows the wrong Box 12 code, understates your qualified overtime or tips, or omits them, a W-2c from your employer is the only correction the IRS accepts for these deductions for 2026 and later. Our checker generates a request letter you can send.

Where it applies: Correcting W-2 reporting errors.
Source: IRS Fact Sheet FS-2026-13, Q22–Q23

Related: W-2 Code Checker · Form 4852 · Reported-amount ceiling

Form 4852

A substitute W-2 form that does NOT work for these deductions.

Form 4852 is normally used as a substitute when a W-2 is missing. For the tips and overtime deductions it does not work: the IRS states that for 2026 and later you cannot use Form 4852 to create or increase a TT or TP amount — only a Form W-2c from the employer fixes the record.

Where it applies: W-2 problems — what not to rely on.
Source: IRS Fact Sheet FS-2026-13, Q22–Q23

Related: Form W-2c

Reported-amount ceiling

From 2026, your deduction cannot exceed what your W-2 reports.

For tax years 2026 through 2028, the amount of qualified overtime or tips you may deduct is capped at the amount your employer reported in Box 12 (code TT or TP), even if your own records show more. And if the W-2 reports more than was actually paid, only the amount actually paid counts. The way to raise the ceiling is a corrected Form W-2c.

Where it applies: Tips and overtime deductions, 2026–2028.
Source: IRS Fact Sheet FS-2026-13, Q20–Q22

Related: Code TT · Code TP · Form W-2c · Transition year (2025)

Transition year (2025)

For 2025 only, separate W-2 reporting was not required.

Tax year 2025 is a transition year for the new deductions: employers did not have to separately report qualified tips or overtime, and workers may claim the deductions using their own records of amounts actually received. From 2026, separate reporting is mandatory and the reported-amount ceiling applies.

Where it applies: Tax year 2025 claims.
Source: IRS Notices 2025-62 and 2025-69

Related: Reported-amount ceiling

Senior deduction

An extra $6,000 deduction per person aged 65 or older.

For tax years 2025–2028, each taxpayer (and spouse, on a joint return) who is 65 or older by the end of the year gets an additional deduction of $6,000, whether or not they itemize. It phases out at 6% of MAGI over $75,000 ($150,000 joint) per person.

Where it applies: Schedule 1-A, Part V — line 37.
Source: IRS, Schedule 1-A (final form, PDF), Part V; IRS Fact Sheet FS-2026-01

Related: Schedule 1-A Helper · Phase-out

Qualified passenger vehicle loan interest

Interest on a new personal-use car loan, up to $10,000.

Interest paid on a loan used to buy a new passenger vehicle for personal use qualifies for a deduction of up to $10,000 a year. It phases out once MAGI passes $100,000 ($200,000 joint), reduced by $200 for each $1,000, or part of $1,000, over the threshold (this one rounds up).

Where it applies: Schedule 1-A, Part IV — line 30.
Source: IRS, Schedule 1-A (final form, PDF), Part IV; IRS Fact Sheet FS-2026-01

Related: Schedule 1-A Helper · Phase-out

Form 1040, line 13b

Where the total of all four deductions lands on your return.

Line 13b of Form 1040 is where the total from Schedule 1-A, line 38, is entered. It is separate from the standard deduction and from itemized deductions — you claim it in addition to whichever of those you take.

Where it applies: Final step of all four deductions.
Source: IRS, Schedule 1-A (final form, PDF), line 38

Related: Schedule 1-A · Schedule 1-A Helper

Full source list and verification method: Accuracy & Sources. This glossary is general information, not tax advice.