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No Tax on Tips Calculator (2025-2028)

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Enter your qualified tip income and MAGI to estimate your federal "No Tax on Tips" deduction under the One Big Beautiful Bill Act (OBBBA), for tax years 2025-2028.

No Tax on Tips Calculator

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Deductible amount
$12,000
Max cap (before phase-out)
$25,000
Phase-out reduction
$0
Based on IRC Section 224 (OBBBA), tax years 2025-2028. Tips still owe FICA and may owe state tax. Not tax advice - consult a tax professional.

The formula

Base cap: $25,000 (same for all filing statuses) If MAGI is above the threshold ($150,000 single / $300,000 joint): Reduction = floor((MAGI - threshold) / 1,000) x $100 Effective cap = Base cap - Reduction (never below $0) Deductible amount = the SMALLER of your qualified tip income or the effective cap
Example

Single filer, MAGI $160,000, tip income $30,000: $10,000 over the threshold means a $1,000 reduction, dropping the cap to $24,000 - so the deductible amount is $24,000, even though total tip income was higher.

Step-by-step guide

  1. Find your qualified tip income - tips from an occupation that customarily and regularly received tips before 2025 (servers, bartenders, salon workers, and similar roles).
  2. Select your filing status and enter your Modified Adjusted Gross Income (MAGI) for the year.
  3. Read your deductible amount - this reduces your federal taxable income, available whether you itemize or take the standard deduction.

Who actually qualifies for this deduction

Not every tipped worker automatically qualifies. The deduction is limited to occupations that customarily and regularly received tips before 2025 - broadly, roles like servers, bartenders, delivery drivers, salon workers, and similar service occupations. It explicitly excludes anyone working in a "specified service trade or business" - health, law, accounting, consulting, or financial services - even if that person happens to receive tips. Mandatory service charges or auto-gratuities also generally don't count as "tips" for this deduction, even when your employer labels them that way on a receipt.

Common mistakes

Assuming "no tax on tips" means tips are completely tax-free - it's a deduction that reduces federal income tax specifically. FICA (Social Security and Medicare) still applies, and many states still tax tip income.
Counting mandatory service charges or auto-gratuities as qualified tips - these generally don't meet the definition, even if labeled "tips" on a bill or receipt.

Frequently asked questions

Does the $25,000 cap double for married couples filing jointly?

No - unlike the overtime deduction, the tips deduction cap stays at $25,000 regardless of filing status. Only the MAGI phase-out threshold changes between single and joint filers.

Are self-employed and gig workers eligible?

Yes - self-employed individuals and gig economy workers in qualifying occupations may claim the deduction for qualified tips, in addition to traditional W-2 employees.

Is this deduction available every year going forward?

Currently, it's only available for tax years 2025 through 2028 under the law as written. It would require new legislation to extend beyond 2028.

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