No Tax on Tips Calculator
Calculate your federal tax deduction for qualified tips under the One Big Beautiful Bill Act (2025-2028). Up to $25,000 deduction for eligible workers.
$25,000
Max annual deduction
70+
Qualifying occupations
2025-2028
Tax years eligible
Calculate Your Tips Deduction
Note: Married taxpayers must file jointly to claim this deduction.
Phase-out begins at $150,000.
Cash tips reported on W-2 Box 12 (Code TP), Form 4137, or 1099. Maximum deduction is $25,000.
Important: This calculator provides estimates for educational purposes only and does not constitute tax, legal, or financial advice. Tax laws are complex and subject to change. The calculations shown are based on our interpretation of 26 U.S.C. §§ 224-225 and IRS guidance as of 2026. Your actual tax situation may differ. Consult a qualified tax professional for advice specific to your circumstances.
Who Does NOT Qualify for the Tips Deduction
Workers in "Specified Service Trades or Businesses" (SSTB) cannot claim the tips deduction, even if they receive tips. Per 26 U.S.C. § 224(d)(2)(B), this includes:
- Health (doctors, dentists, nurses, etc.)
- Law (attorneys, paralegals, etc.)
- Accounting
- Actuarial science
- Performing arts
- Consulting
- Athletics
- Financial services
- Brokerage services
- Any trade or business where the principal asset is the reputation or skill of employees/owners
Requirements for Qualified Tips
Must be voluntary: Tips must be paid voluntarily by customers without compulsion. Automatic gratuities and service charges do NOT qualify.
Cash tips only: Includes cash, credit card tips, and tips from tip pools. Does not include non-cash tips or negotiated amounts.
Qualifying occupation: You must work in an occupation that customarily received tips before December 31, 2024.
Source: IRS Final Regulations, 26 U.S.C. § 224
What is the Qualified Tips Deduction?
The "No Tax on Tips" provision, enacted as part of the One Big Beautiful Bill Act (P.L. 119-21), allows eligible tipped workers to deduct up to $25,000 of qualified tips from federal income tax. This deduction is available for tax years 2025 through 2028.
To qualify, tips must be received in an occupation that customarily and regularly received tips before December 31, 2024, and the worker cannot be employed in a "specified service trade or business" (SSTB).
Key Rules for the Tips Deduction
Who Qualifies
- • Work in a qualifying tipped occupation
- • Must have valid SSN for employment
- • Married taxpayers must file jointly
- • Cannot work for an SSTB employer
Deduction Limits
- • $25,000 maximum per return
- • Phase-out starts at $150k/$300k MAGI
- • Reduced by $100 per $1,000 over threshold
- • Self-employed: limited to net business income
What Counts as Qualified Tips
- • Cash tips (including credit card tips)
- • Tips from tip pools
- • Must be voluntary, customer-determined
- • NOT automatic gratuities or service charges
Reporting Requirements
- • W-2 Box 12, Code TP (starting 2026)
- • Form 4137 for unreported tips
- • 1099-NEC/MISC/K for self-employed
- • Reported on Schedule 1-A