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No Tax on Tips & Overtime Calculator

“No tax on tips” isn't quite what the headlines say. This calculator shows what the 2025–2028 deductions are actually worth for your tips and overtime — after the caps, the income phaseout, and the premium-only overtime rule.

Both deductions in one place
Income phaseout applied
FLSA premium-only overtime math
Self-employed net-income limit

Your Situation

2026 tax year (deduction runs 2025–2028)

$

Voluntary tips only — automatic service charges don't count

$
$

Phaseout starts at $150,000 ($300,000 married filing jointly)

Your estimated deduction

$16,000

≈ $1,920 in federal tax savings at your 12% rate

How it breaks down

Tips deduction$15,000
Qualified tips$15,000
After $25,000 cap$15,000
Overtime deduction$1,000
Total overtime pay$3,000
Deductible premium (the “half”)$1,000
This is an income tax deduction, not a payroll tax exemption — you still pay about $1,148 in Social Security & Medicare tax on your tips. Estimates use 2026 brackets (Rev. Proc. 2025-32) and assume your occupation is on the Treasury tipped-occupation list.

Frequently Asked Questions

Are tips completely tax-free now?

No. Tips are still reported as income and still subject to Social Security and Medicare (FICA) taxes. What is new is a federal income tax deduction of up to $25,000 per return for qualified tips (2025–2028), which you can claim on Schedule 1-A even if you take the standard deduction.

Which occupations qualify for the tips deduction?

Treasury final regulations (TD 10044) list 70+ occupations that customarily receive tips — servers, bartenders, hairstylists, nail techs, rideshare and delivery drivers, valets, casino dealers, musicians, and more. Your W-2 will show your Treasury Tipped Occupation Code (TTOC) in Box 14b starting with tax year 2026.

Do automatic gratuities and service charges count?

No. Only voluntary tips qualify. Mandatory service charges — like an automatic 18–20% added for large parties — are treated as regular wages, not qualified tips.

Why is only part of my overtime pay deductible?

The deduction covers only the overtime premium required by the federal FLSA — the extra "half" in time-and-a-half. If you earn $30/hour and $45/hour on overtime, only the $15/hour premium is deductible, up to $12,500 ($25,000 married filing jointly).

What if I am married filing separately?

Married taxpayers must file jointly to claim either deduction. Filing separately makes both deductions unavailable.

Do these deductions expire?

Yes — both apply to tax years 2025 through 2028 only, unless Congress extends them.

Estimates only — not tax advice. Occupation eligibility, W-2 reporting, and multi-job situations have fine print. Talk to a CPA →

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