Free tool · Updated August 2026 · reflects IRS final rule T.D. 10044
No Tax on Tips Deduction Calculator
Estimate your federal tip income deduction for 2025–2028 — enter your qualified tips, income, and filing status.
Filing status
Marginal tax bracket
Estimated deduction
$18,000.00
≈ $2,160.00 less federal income tax at 12%
Tips counted (capped at $25,000)$18,000.00
Phase-out reduction (MAGI)−$0.00
FICA 7.65% still applies$1,377.00
Estimate only, not tax advice. Deduction = IRC §224 (tax years 2025–2028, final rule T.D. 10044): up to $25,000 of qualified tips per return, phased out $100 per $1,000 of MAGI above $150k (single) / $300k (joint). Auto-gratuities and mandatory service charges don't qualify. Your occupation must be on the IRS list (74 TTOC codes — servers, bartenders, barbers, nail techs, delivery drivers and more). Your W-2 now reports employer-tracked tips; unreported cash tips and tip-outs are where your own records matter.
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The rule, in plain language
The 2025 law ("One Big Beautiful Bill", IRC §224) created a federal deduction of up to $25,000 per return for qualified tip income, for tax years 2025 through 2028. It's above-the-line: you don't need to itemize. High earners lose it gradually — $100 of deduction per $1,000 of MAGI above $150k (single) / $300k (married filing jointly).
What counts — and what doesn't
Qualified: voluntary cash tips, tips on cards, and your share of a tip pool, earned in one of the 74 listed occupations (Treasury TTOC codes — the list covers most restaurant, beverage, beauty, delivery, and personal-service jobs). Not qualified: automatic gratuities and mandatory service charges (the 18% your house adds to parties of 8 isn't a "tip" in the IRS's eyes), and tips earned in a specified service business above the income limits.
Where your own records still decide the outcome
From 2026, your W-2 reports employer-tracked tips. But three things never make it onto a W-2: cash tips that bypass the POS, tip-outs you paid to support staff, and gig income across multiple apps. IRS Publication 531 tells tipped workers to keep a daily record — in an audit, a contemporaneous per-shift log with the original checkout slips is the strongest evidence you can have. That's the record TipScan builds for you automatically.
FAQ
How does the No Tax on Tips deduction work?＋
For tax years 2025–2028, workers in listed tipped occupations can deduct up to $25,000 per return of qualified tips from taxable income (an above-the-line deduction, so you get it even with the standard deduction). It phases out $100 per $1,000 of MAGI above $150,000 (single) or $300,000 (joint).
Which tips qualify?＋
Voluntary cash tips, charged tips, and amounts received through tip pools in one of the 74 occupations the IRS listed (final rule T.D. 10044) — servers, bartenders, barbers and stylists, nail techs, delivery and rideshare drivers, and more. Automatic gratuities and mandatory service charges do NOT qualify.
Do tips still get taxed at all?＋
Yes — the deduction reduces federal income tax only. Social Security and Medicare (FICA, 7.65%) still apply to all reported tips, and your state may still tax them.
My W-2 already shows my tips. Do I still need my own records?＋
Starting with 2026 W-2s, employers report tips (Box 12 code TP) and your occupation code (Box 14b). What the W-2 can't show: cash tips that never hit the POS, and tip-outs you paid to others. Those only exist in your own log — which is exactly what TipScan keeps.
When does the deduction end?＋
It sunsets after tax year 2028 unless Congress extends it. That leaves the 2026, 2027, and 2028 tax years to claim it (2025 too, if you qualified).
This tool is an estimate for planning purposes only — not tax, legal, or financial advice. Verify against IRS guidance or a tax professional.