No Tax on Tips calculator,
the real 2025-2028 deduction.

Tips tax guide

The "No Tax on Tips" deduction, explained

"No Tax on Tips" is a real federal deduction created by the One Big Beautiful Bill Act, not a rumor or a misread headline — it lets qualifying workers deduct up to $25,000 of voluntary tip income from federal taxable income, for tax years 2025 through 2028. It's available whether you itemize or take the standard deduction.

A flat $25,000 cap — for everyone

Unlike its sibling provision (the "No Tax on Overtime" deduction, which splits its cap by filing status — $12,500 for single/Head of Household/Married Filing Separately versus $25,000 for Married Filing Jointly), the tips deduction's $25,000 cap is flat and identical across every filing status. Don't assume the two deductions share a cap structure just because they came from the same law.

The MAGI phase-out, with a worked example

The deduction phases out $100 for every $1,000 your modified adjusted gross income (MAGI) exceeds $150,000 (single/HOH) or $300,000 (MFJ) — fully eliminated at $400,000 single/HOH or $550,000 MFJ.

Say a single filer earns $22,000 in qualified tips with a total MAGI of $275,000 — exactly halfway through the $150k-$400k phase-out range. Only 50% of the deduction survives: $11,000, not the full $22,000. The real tax savings on that $11,000 deduction come to $3,804 — not a clean 32% or 35% of $11,000, because the deduction itself straddles the 32%/35% bracket boundary (which sits at $250,525 for single filers), so part of it is taxed away at each rate. The blended effective rate on this specific deduction works out to about 34.6%, not a single bracket's headline number.

Who actually qualifies

This is deliberately not a deduction for anyone who happens to receive a tip. The IRS's final regulations list 70+ specific occupations across 8 categories — food and beverage service, hospitality, personal care, transportation, and others — that customarily and regularly receive tips. Each qualifying occupation has its own Treasury Tipped Occupation Code. If your job isn't on that list, this deduction doesn't apply to you no matter how much you earn in tips.

One filing-status wrinkle worth calling out plainly: Married Filing Separately does not qualify for this deduction at any income level. This isn't a low phase-out threshold — it's a complete exclusion. If you're married, you must file jointly to claim it.

What this deduction doesn't cover

• FICA/SECA tax: Social Security and Medicare tax still apply in full to every dollar of tip income — this is a federal income tax deduction only.
• Mandatory service charges and auto-gratuities: only voluntary, customer-paid tips qualify — a mandatory 18% charge added to a large party's bill does not.
• Tips paid in digital assets: tips paid in cryptocurrency or other digital assets are explicitly excluded.
• Self-employed workers can qualify, but the deduction can't exceed their net income from the specific tipped trade or business, and can't create or increase a loss.

How this relates to the overtime deduction

"No Tax on Tips" and "No Tax on Overtime" come from the same law and share the same phase-out mechanics ($100 reduction per $1,000 of MAGI over threshold, same MFS exclusion), but they are genuinely different provisions with different caps: tips get one flat $25,000 cap for every filing status, while overtime splits its cap by status. If you have both tip income and overtime pay, you may be eligible for both deductions simultaneously — they don't share a combined cap.

Disclaimer

This calculator provides a directional estimate based on the published law and IRS regulations as of this writing. It does not account for state income taxes, and it assumes the tip income and occupation you enter genuinely qualify — always verify your specific occupation against the IRS's official qualifying list before filing, and consult a tax professional for your individual situation.