No Tax on Tips Calculator
Check your 2026 qualified-tip deduction against the $25,000 cap and the MAGI phase-out, then see the FICA and state tax still owed on every tip dollar.
No Tax on Tips Calculator
Your tipped pay
Enter your cash wage, hours, and reported tips, then set your filing status and state rate.
The wage printed on your paystub, not your tipped-out total. The federal tipped cash minimum is $2.13/hr.
Anything above 40 is split out and paid at 1.5x automatically.
Cash, card, and tip-pool tips you report. Mandatory service charges and auto-gratuities are wages, not qualified tips.
Second job, a spouse's wages, side work: anything else in your MAGI. This is what drives the phase-out.
Enter 0 for AK, FL, NV, NH, SD, TN, TX, WA, and WY.
Most states do not. Check this only if you have confirmed your state adopted the OBBBA tip deduction.
Tipped minimum wage check
Federal is $7.25/hr. Use your state or city figure if it is higher. This drives the top-up warning only.
Section 224 requires a joint return. Married filers who file separately cannot claim the tip deduction, so the amount above is $0 no matter how much you earn in tips.
Withholding does not change on its own, so this arrives as a bigger refund unless you add the deduction to Step 4(b) of your W-4.
- Gross wages
- $0
- Tips
- $0
- Other income
- $0
- Total gross
- $0
- Federal income tax
- $0
- Social Security
- $0
- Medicare
- $0
- State income tax
- $0
- Net take-home
- $0
Hours above 40 are paid at 1.5x here. The OBBBA overtime deduction ($12,500 single, $25,000 joint) is a separate allowance that covers only the premium half of overtime pay, and this calculator does not claim it. A tipped employee's overtime is also figured on the full minimum wage, not on the $2.13 cash wage.
With zero hours entered, the minimum-wage check is switched off. If those tips come from self-employment, the deduction is limited to the net income of the business and you owe self-employment tax rather than employee FICA.
2026 estimate using the federal brackets, the $184,500 Social Security wage base, and a flat state rate. The deduction only covers occupations on the Treasury Tipped Occupation Code list, and employees of specified service trades or businesses are generally excluded, though IRS Notice 2025-69 suspends enforcement of that bar for now. Not filing-grade: it leaves out pre-tax deductions, local taxes, and credits.
What "no tax on tips" actually removes from your paycheck
A tip dollar gets taxed three times over: federal income tax, FICA (Social Security and Medicare), and, in most states, state income tax. The 2026 deduction removes one of the three. Up to $25,000 of qualified tips comes off your taxable income for tax years 2025 through 2028, which cuts the federal income tax on those tips. The other two do not move.
Run the default numbers and you can see the split. A server on a $9.00 cash wage working 32 hours a week earns about $14,976 in wages, plus $24,000 in reported tips, for roughly $38,976 of gross income. All $24,000 of tips sits under the cap, so the full amount is deductible. After the $16,100 standard deduction there is only $22,876 of taxable income left for it to erase, so the deduction takes the federal income tax bill to zero: about $2,497 gone, not the full 12 percent of the tips. Social Security and Medicare still take 7.65 percent of the tips, about $1,836, and a 4 percent state that did not conform takes another $960. The headline says tips are untaxed. The paystub says roughly $2,796 still comes out of them.
How the $150,000 phase-out shrinks the deduction
The deduction starts shrinking once modified adjusted gross income passes $150,000 for single and head of household filers, or $300,000 for joint filers. Schedule 1-A handles it with plain arithmetic: take your MAGI above the threshold, round that excess down to the next lower whole $1,000, then subtract $100 for each of those thousands. A single filer at $178,400 is $28,400 over, which rounds to 28 thousands, so the deduction drops by $2,800.
Keep going and the deduction runs out entirely. At the full $25,000 cap that happens at $400,000 of MAGI for a single filer and $550,000 for a joint filer. A smaller tip total hits zero earlier, because there is less of it to erode: $10,000 of tips is gone by $250,000 single. Here is the part most calculators skip. Section 63(b) takes the tip deduction after AGI rather than as a reduction to it, so claiming the deduction never lowers the MAGI that drives its own phase-out, and it never loosens any other AGI-based limit either.
For a tipped worker, the income that triggers the phase-out is rarely the tips. It is the second job, or a spouse's salary, or one unusually good year of freelance work. Model that side of it with the Second Job Take-Home Calculator, which stacks extra income on top of your main pay and shows the marginal rate it lands in.
Getting the money sooner: W-4 Step 4(b) versus waiting for the refund
Payroll withholding did not change when the law did. Your employer runs the same percentage method tables it always ran, so the deduction only shows up once a year, at filing, as a bigger refund. If you would rather have it spread across 26 paychecks, the route is the deductions worksheet on the 2026 Form W-4: estimate your qualified tips for the year, work the worksheet, and carry the result into Step 4(b). Withholding drops and take-home rises. The refund shrinks by the same amount. Size the change with the W-4 Withholding Planner before you hand anything to payroll.
Be conservative with that estimate. Tips are seasonal, and one slow winter can leave you under-withheld against a deduction you never fully earned. That is a balance due in April. Two changes to the 2026 Form W-2 tell you where the official number comes from: your Treasury Tipped Occupation Code lands in the new box 14b, and your qualified tips appear in box 12 with code TP. That box 12 figure is what flows onto your return, so compare it against your own tip log before you file.
Tipped minimum wage, overtime, and what the deduction never touches
Federal law lets an employer pay a cash wage as low as $2.13 an hour and claim up to $5.12 an hour as a tip credit toward the $7.25 federal minimum. If your cash wage plus your actual tips does not average at least the minimum wage for the pay period, the employer has to make up the difference. Seven states (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington) bar the tip credit entirely and pay the full state minimum before tips. The minimum-wage check in the advanced panel above flags it when your numbers fall short.
Overtime works differently for tipped staff than most people expect. The time-and-a-half is calculated on the full minimum wage, not on the $2.13 cash wage, and the tip credit comes off afterward. And do not confuse the tip deduction with the separate OBBBA overtime deduction, which caps at $12,500 single or $25,000 joint and only applies to the premium half of overtime pay. The two share the same $150,000 and $300,000 phase-out thresholds, which makes them easy to blur together, but they are separate allowances. If you want a running record rather than a one-off estimate, the Stub44 Salary Calculator app saves your profile so you are not retyping the same wage and hours every week. If you are weighing a salaried offer against tip income, the Net to Gross Salary Calculator works backward from the take-home you need, and the Bonus Tax Take-Home Calculator covers the other big "why was that taxed like that" line on a paystub.
Frequently Asked Questions
Common questions about no tax on tips calculator
Does "no tax on tips" mean my tips are completely tax-free in 2026?
No. The break is a deduction against federal income tax and nothing else, capped at $25,000 of qualified tips, and it runs for tax years 2025 through 2028. Social Security and Medicare still come out of every reported tip dollar, and most states still tax tips in full. The calculator above splits a single tip dollar so you can see which part the deduction removes and which part does not move at all.
Do I still pay Social Security and Medicare on my tips?
Yes. Reported tips are FICA wages. Social Security takes 6.2 percent up to the 2026 wage base of $184,500 and Medicare takes 1.45 percent on every dollar, with another 0.9 percent Additional Medicare above $200,000 (single) or $250,000 (married filing jointly). None of that changes, because the tip break is an income tax deduction and FICA is a separate system. The upside is that tips run through payroll keep building your Social Security earnings record.
How much can I deduct, and what happens if I earn more than $25,000 in tips?
The cap is $25,000 of qualified tips per return for 2026. Tips above the cap are taxed normally, so a server with $34,000 in reported tips deducts $25,000 and pays regular federal income tax on the remaining $9,000. The calculator breaks that excess out on its own line, so you can see how much of your tip income the deduction never reaches. If you are self-employed, the deduction is limited further, to the net income of the business.
At what income does the tip deduction phase out completely?
The phase-out starts at $150,000 of modified adjusted gross income for single and head of household filers, and $300,000 for joint filers. Each full $1,000 above the threshold cuts the deduction by $100, and Schedule 1-A rounds the excess down to the next lower whole $1,000 before multiplying. At the full $25,000 cap the deduction hits zero at $400,000 (single) or $550,000 (joint). Smaller tip totals run out sooner: $10,000 of tips is gone by $250,000 single. What usually pushes a tipped worker into that band is not the tips, it is everything else on the return, so check the Second Job Take-Home Calculator if you work more than one job.
Will my paycheck get bigger, or do I have to wait for a refund?
By default you wait. Nobody rewrote the payroll withholding tables for this, so your employer keeps withholding as though the deduction does not exist and you see the money as a larger refund. To collect it during the year instead, run your estimated tip deduction through the deductions worksheet on the 2026 Form W-4 and carry the total into Step 4(b). Size that change with the W-4 Withholding Planner, and lowball it. If tips run below plan, an over-adjusted W-4 turns the refund into a bill.
Does my state tax my tips even though the federal government does not?
Usually yes. Section 224 is federal, and a state only follows it if that state chooses to. Ballotpedia counted 19 of the 41 states with a broad wage income tax as conformed in May 2026, with 21 not conformed and Georgia partly conformed. A few rolling-conformity states, Colorado among them, decoupled on purpose. That is why this tool gives you a conformity checkbox instead of a built-in state list: the list keeps moving. Leave the box unchecked unless you have confirmed your own state adopted the deduction.
Do auto-gratuities, service charges, and tip pools count as qualified tips?
Voluntary tips qualify, whether they came in as cash, on a card, or as your share out of a tip pool, as long as the customer decided the amount and you reported it. Mandatory service charges and auto-gratuities on large parties are wages, not tips, so they never count toward the deduction even though they land in your pay. Your occupation also has to appear on the Treasury Tipped Occupation Code list, which covers more than 70 occupations across eight categories.
Can I claim the deduction if I am married and file separately, or if I take the standard deduction?
Filing separately disqualifies you. Section 224(f) requires a joint return, so a married taxpayer filing separately gets nothing, which is why the calculator drops to $0 and explains itself when you pick that status. Taking the standard deduction is fine, though. Section 63(b) allows the tip deduction after AGI, so it sits on top of the standard deduction whether or not you itemize. You also need a valid Social Security number on the return.