No Tax on Tips Calculator (2026): Estimate Your Deduction

How it works

Enter your tips
Voluntary tips from a job on the IRS list, as shown on your W-2 or 1099.
Add your income
Your modified adjusted gross income and filing status set the phase-out.
See the saving
Pick your federal bracket, and your state rate if your state follows the deduction.

US federal income tax only. Checked against the law, IRS pages and the final regulations in October 2026. This is general information, not tax advice.

The short version

You can deduct up to $25,000 of tips a year from federal taxable income, for tax years 2025 to 2028. The IRS says the cap is $25,000 per return. A married couple filing jointly shares one $25,000 cap, even if both spouses earn tips.
You do not need to itemize: it is claimed on top of the standard deduction, on Schedule 1-A.
The deduction shrinks by $100 for every full $1,000 of income over $150,000 (single) or $300,000 (married filing jointly).
Tips must be voluntary and earned in a job on the IRS list. Service charges and automatic gratuities do not count.
Social Security and Medicare tax still apply. Whether your state follows the deduction depends on the state.

What it is worth

Example (single filer)	Deduction	Saved at 12%	Saved at 22%
$12,000 tips, MAGI $60,000, single	$12,000	$1,440	$2,640
$30,000 tips, MAGI $60,000, single	$25,000	$3,000	$5,500
$20,000 tips, MAGI $170,000, single	$18,000	$2,160	$3,960

The saving is roughly the deduction multiplied by your top federal tax rate. At an income of $60,000 a single filer is usually in the 12% bracket. These are estimates that ignore bracket edges and credits.

Who can claim it

If you are married you must file a joint return to claim the deduction. Married filing separately cannot claim it. Single, head of household and joint filers can.

You must put a valid Social Security number on your return, one that is valid for employment. People filing with an ITIN cannot claim it. For a married couple, the spouse who earned the tips needs the valid SSN.

Self-employed people and independent contractors can claim the deduction for tips in a listed occupation. The deduction cannot be more than the net income of the business where the tips were earned (gross income including tips, minus that business's expenses), figured before this deduction. It cannot create or increase a loss. Partners cannot claim tips reported to the partnership.

Which tips count

A qualified tip is a cash tip, meaning paid in cash or charged (card, check, gift card and similar cash-denominated electronic payments), received in an occupation on the IRS list. It must be voluntary, not negotiated, and the amount must be set by the customer, with no consequence if they do not pay. Tips shared through a tip pool count for employees. Service charges and automatic gratuities do not count. A point-of-sale tip screen still qualifies if the customer can choose zero.

These do not count: mandatory service charges and automatic gratuities, tips paid in digital assets including stablecoins, money from illegal activity, and payments a customer must make to get a service or content. Tips received by managers or supervisors through a tip pool do not count, though tips paid to them directly for their own service can. Any part of a tip a platform keeps is not your qualified tip.

Which jobs are on the list

Tips only qualify if earned in an occupation that customarily and regularly received tips on or before 31 December 2024. The final IRS list has 71 occupations in 8 groups, each with a 3-digit Treasury Tipped Occupation Code (TTOC). Examples:

Bartenders (101)
Wait Staff (102)
Fast Food and Counter Workers (107)
Musicians and Singers (206)
Entertainers and Performers (208), e.g. street performer, magician, clown, comedian
Digital Content Creators (209)
Concierges (302)
Barbers, Hairdressers, Hairstylists, and Cosmetologists (603)
Tattoo Artists and Piercers (609)
Tour Guides (704)
Taxi and Rideshare Drivers and Chauffeurs (802)
Goods Delivery People (804)

The full list is on the IRS occupation list.

Buskers and street performers

Musicians and singers, and entertainers and performers, including street performers, are on the IRS list. Two things still matter:

The tips must be on a tax form. The law only allows tips that appear on an information statement (Form W-2, 1099-NEC, 1099-MISC or 1099-K) or that an employee reports on Form 4137. Form 4137 is for employees. The final regulations say tips not on a statement or Form 4137 are not eligible, and that a way for contractors to report tips missing from an information return is beyond the scope of the rules. Self-employed people must also keep records such as tip logs. So cash dropped in a hat with no 1099 behind it may not be deductible, even though the occupation is listed. Keep records and ask a tax adviser.
The same law restored the old 1099-K threshold: a payment app or card processor only has to issue a Form 1099-K when payments to you are over $20,000 and more than 200 transactions in a year. Below that you may get no 1099-K, which matters for the reporting requirement above.

Tips earned in a specified service trade or business (SSTB, as defined in section 199A, for example health, law, accounting, performing arts, athletics, consulting) do not qualify. An employee is treated as being in an SSTB if the employer's business is one. Until 1 January of the year after final SSTB rules are issued, the IRS will treat anyone in a listed tipped occupation as not in an SSTB. The final regulations of April 2026 reserved the SSTB section, so this relief still applied when checked. Performing arts is an SSTB category under 199A, so this matters for musicians once SSTB rules are written.

How to claim it

Claim it on Schedule 1-A (Form 1040), Part II, No Tax on Tips. The result goes on Form 1040 line 13b. Employees start from Form W-2 box 7 (social security tips) or Form 4137. Self-employed people enter the qualified tip amount included in Form 1099-NEC box 1, Form 1099-MISC box 3 or Form 1099-K box 1a, capped at the net profit of that business. If you already filed for 2025 and missed it, you may need to amend.

From tax year 2026 employers report qualified cash tips in Form W-2 box 12 with code TP and put the Treasury Tipped Occupation Code in box 14b. Code 000 means a non-qualifying occupation; if 000 is the only code, the TP amount is not qualified tips. 2026 Forms 1099-NEC, 1099-MISC and 1099-K separately report tips and the occupation.

2025 Forms W-2 and 1099 were not changed, so for 2025 only the IRS lets employees use W-2 box 7, tips reported to the employer on Form 4070, or a box 14 amount from the employer, plus Form 4137 line 4. Non-employees may treat the requirement as met if their tips are inside the totals on a 1099-NEC, 1099-MISC or 1099-K, and work out the tip amount from records such as daily tip logs, point-of-sale reports or payment platform records. The IRS example is a self-employed travel guide whose $55,000 1099-K did not split out tips but whose tip log showed $7,000; the $7,000 counts.

State income tax

The deduction is federal. Each state decides whether to follow it. Ballotpedia counted, in May 2026, 19 of the 41 states with a broad wage income tax conforming, 21 declining and Georgia partly conforming. A November 2025 Thomson Reuters review listed Arizona as passing its own tip exemption, Colorado allowing the tip deduction, and Iowa, Montana, North Dakota and Oregon following federal taxable income automatically, while California, New York, Illinois, Massachusetts, Connecticut and Hawaii were not conforming. Nine states have no wage income tax at all. Check your state revenue department because this changes. Check with your state's revenue department before counting on a state saving.

Where the rules come from

The deduction was created by section 70201 of Public Law 119-21 (the One Big Beautiful Bill Act, signed 4 July 2025). It adds a new section 224 to the Internal Revenue Code called Qualified Tips. The IRS now also calls this package the Working Families Tax Cuts. Proposed regulations (REG-110032-25) were published on 19 September 2025. Final regulations, T.D. 10044, were published in the Federal Register on 13 April 2026 and took effect 12 June 2026. They apply to tax years beginning after 31 December 2024. They kept every proposed occupation, added Visual Artists, Floral Designers and Gas Pump Attendants, excluded digital assets, included foreign currency, and covered gig delivery drivers and digital content creators.

Common questions

Is there really no tax on tips?

Not completely. Up to $25,000 of qualified tips a year can be deducted from federal taxable income for 2025 to 2028. Social Security and Medicare tax still apply, and states decide for themselves.

Do I need to itemize to claim the tips deduction?

No. It is claimed on Schedule 1-A on top of the standard deduction.

Is the $25,000 cap per person or per return?

Per return. A married couple filing jointly shares one $25,000 cap, even if both earn tips.

Do card tips count?

Yes. Tips paid by card, check or similar cash-denominated payments count as cash tips, as long as they are voluntary and in a job on the IRS list.

Can buskers claim the deduction?

Street performers, musicians and singers are on the IRS list, but the tips must appear on a W-2 or 1099 (or Form 4137 for employees). Cash with no form behind it may not qualify, so keep records and ask a tax adviser.

Are service charges and automatic gratuities included?

No. Mandatory service charges and automatic gratuities are not qualified tips.

No tax on tips calculator