Schedule 1 is the IRS form used to report income that doesn’t fit directly on Form 1040, such as foreign scholarships, cryptocurrency, or self-employment profit, and to claim above-the-line deductions like the self-employment tax deduction.
For Americans living abroad, filing Form 1040 often involves more than reporting wages or foreign income. Form 1040 Schedule 1 may be required when you have certain types of additional income or deductions that aren’t reported directly on the main tax return.
Understanding when Schedule 1 applies can help expats avoid missed income, incorrect deductions, and filing errors. Below, we explain what Schedule 1 covers, when expats may need to file it, and how it fits into your overall US tax return
Key Takeaways: Form 1040 Schedule 1
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Schedule 1 reports additional income in Part I and above-the-line deductions in Part II, and attaches to Form 1040, 1040-SR, or 1040-NR.
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Foreign scholarships, cryptocurrency, and forex gains typically land on line 8 as Other income.
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Self-employed expats can deduct half their self-employment tax on line 15, one of the more overlooked adjustments.
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Schedule 1-A is a separate, newer form for below-the-line deductions like no tax on tips or overtime, and doesn’t replace Schedule 1.
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Most Americans abroad need Schedule 1 simply because foreign income rarely fits the five categories Form 1040 covers on its own.
Form 1040 Schedule 1 Guide
| Feature | Detail |
| Full name | Additional Income and Adjustments to Income |
| Attaches to | Form 1040, 1040-SR, or 1040-NR |
| Part I | Additional income, lines 1 through 10 |
| Part II | Adjustments to income, lines 11 through 26 |
| Where totals go | Part I total to Form 1040, line 8. Part II total to Form 1040, line 10 |
| Common expat uses | Foreign scholarships, crypto income, forex gains, self-employment tax deduction |
Why Expats Run Into Schedule 1 So Often
Form 1040 only has room for a handful of income types: wages, interest, dividends, retirement income, Social Security, and capital gains.
If your income comes from any of those five sources and you have no adjustments, you may not need Schedule 1 at all.
But foreign income rarely stays in those lanes.
A teaching stipend abroad, cryptocurrency gains, freelance income from overseas clients, or a foreign scholarship all need to be reported through Schedule 1’s “Other income” line rather than anywhere on the main form.
This is one of the more common gaps in expat filing, where someone files a technically complete return but leaves out income the IRS expects to see on Schedule 1 simply because it didn’t look like it belonged on Form 1040.
Part I: Additional Income
Part I covers income the main Form 1040 doesn’t have a dedicated line for. The most relevant lines for Americans abroad include:
- Line 1: Taxable state refunds, relevant if you itemized deductions in a prior year
- Line 3: Business income, which flows in from Schedule C for self-employed expats and freelancers
- Line 8, “Other income”, the catch-all line with lettered sub-items covering things like:
- Foreign scholarships or grants that exceed the tax-free portion, reported at line 8r
- Digital asset income not reported elsewhere, such as staking rewards or certain fork income, reported at line 8v
- Forex trading gains under Section 988, also typically reported here as other income
If you’ve received a foreign scholarship, only the portion that exceeds tuition and qualifying expenses is taxable, and that taxable amount is what lands on line 8r.
Cryptocurrency works the same way: staking rewards, airdrops, and other digital asset income get valued in US dollars on the date received before they’re entered on line 8v.
Currency traders face a similar step, since gains from forex trading under Section 988 are also typically reported as other income here.
The total from Part I carries over to Form 1040, line 8, and becomes part of your total income before any deductions are applied.
Part II: Adjustments to Income
Part II is where Schedule 1 works in your favor. These are above-the-line deductions, meaning they reduce your adjusted gross income directly, whether or not you itemize. The adjustments that come up most for expats:
- Self-employment tax deduction (line 15): If you’re self-employed abroad and file Schedule SE, half of that self-employment tax is deductible here, which lowers your AGI without requiring you to itemize.
- Educator expenses (line 11): Available to teachers at qualifying schools, including some international schools, for up to $300 in unreimbursed classroom expenses.
- HSA deduction (line 13): Relevant mainly to expats who maintain a US-based Health Savings Account.
- IRA deduction (line 20): Can interact with the Foreign Earned Income Exclusion in ways that catch people off guard, since excluded income generally doesn’t count as compensation for IRA contribution purposes.
The Part II total flows to Form 1040, line 10, and reduces your income before your standard or itemized deduction is applied.
Don’t Confuse Schedule 1 With the New Schedule 1-A
Starting with the 2025 tax year, the IRS introduced a separate form, Schedule 1-A, for a handful of new deductions created under recent legislation: no tax on tips, no tax on overtime, car loan interest, and an enhanced deduction for seniors. These are below-the-line deductions, meaning they reduce taxable income after AGI is calculated, and they’re claimed on a different form entirely from Schedule 1.
Most expats won’t interact with Schedule 1-A directly, since it targets domestic wage-based deductions, but it’s worth knowing the two forms serve different purposes if you see both referenced while preparing your return.
Do You Actually Need to File Schedule 1?
You can skip Schedule 1 only if both of the following are true:
- All your income falls into the five categories Form 1040 already covers: wages, interest and dividends, retirement income, Social Security benefits, or capital gains
- You have no adjustments to claim in Part II
For most expats, foreign-sourced income alone is enough to trigger the need for Schedule 1, even before adjustments come into play.
Not Sure If Schedule 1 Applies to You?
Most expats need it once foreign income enters the picture. Universal Tax Professionals can check your situation and file it correctly.
