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Tax year 2026 · Federal & state tables · Computed in your browser

Federal tax saved, on qualified tips.

per year · single · 2026 tables

Tip income
$18,000
Tips within cap
$18,000
Deduction allowed
$18,000
Tax saved
$2,070

The deduction, line by line

Per year
Tip income$18,000.00
Qualified tips considered (statutory $25,000 cap)$18,000.00
Deduction allowed (cap + phase-out applied)$18,000.00
Federal tax saved$2,070.00

Social Security and Medicare (or self-employment tax) still apply to every tipped dollar. Only tips earned in an occupation on the IRS list of tipped occupations count.

The math, shown

Qualified tips are first capped at $25,000 a year. That cap is flat regardless of filing status; it does not double for a joint return, unlike the overtime deduction. The capped amount is then reduced by $100 for every completed $1,000 that modified adjusted gross income (MAGI) sits above $150,000 ($300,000 joint). A partial $1,000 isn't rounded up, so the first reduction doesn't land until MAGI crosses a full $1,000 over the threshold. This calculator approximates MAGI as base wages plus tip income, with no other adjustments; your real MAGI may differ slightly if you have other above-the-line items.

The federal tax saved is the difference between tax on your income with and without that deduction subtracted, on the same 2026 brackets and standard deduction as every other calculator on this site. The deduction stacks on top of the standard deduction, is claimed on Form 1040 Schedule 1-A, and is available whether or not you itemize. Married filing separately cannot claim this deduction at all: IRC §224 requires a joint return for married taxpayers, so the allowed amount is $0 in that filing status regardless of income.

Only tips earned in a qualifying occupation count, and they must be separately reported (on a W-2, 1099, or Form 4137) to be deductible. Social Security, Medicare, or self-employment tax apply to every tipped dollar regardless of whether it qualifies for the deduction.

Quick answers

Are tips tax-free now?
Not entirely. The One, Big, Beautiful Bill Act created a temporary federal deduction (2025–2028) for up to $25,000 of qualified tip income, phasing out above $150,000 of modified AGI ($300,000 filing jointly). It's an income-tax deduction, not an exemption. Social Security, Medicare, and any state income tax still apply to every tipped dollar.
Which jobs qualify?
Only tips earned in an occupation on the official Treasury/IRS occupation list, jobs that customarily and regularly received tips on or before December 31, 2024: servers, bartenders, salon workers, and roughly 70 other occupations grouped into eight categories. Self-employed workers in a Specified Service Trade or Business are excluded.
Do I still pay Social Security on tips?
Yes. The deduction applies only to federal income tax. FICA (Social Security and Medicare) for employees, and self-employment tax for the self-employed, still apply to the full tip amount. The deduction does not touch payroll taxes.
Does my state tax tips?
This calculator computes only the federal deduction under IRC §224. States set their own rules and most have not created a matching state-level deduction, so state income tax (where it applies) still falls on the full tip amount. Check your state's income-tax page for its own treatment.

Sources