No Tax on Tips Deduction Calculator (2026): Save Up to $25,000
The One Big Beautiful Bill Act (OBBBA) lets workers in traditionally tipped jobs deduct up to $25,000 of qualified cash tips from their federal taxable income each year, for tax years 2025 through 2028. The deduction phases out at higher incomes. This calculator applies the exact IRS phase-out formula to show your deduction and estimated tax savings.
Based on OBBBA Section 224: up to $25,000 of qualified tips deducted above-the-line, phasing out $100 per $1,000 of MAGI above $150,000 (single) / $300,000 (joint), fully eliminated at $400,000/$550,000. Available for tax years 2025-2028 only. FICA (Social Security/Medicare) still applies to all tips. Estimate only, confirm with a tax professional or irs.gov.
Based on OBBBA Section 224 as enacted. Tax rules can change, verify your specific situation with a tax professional or irs.gov before filing.
How to use this tool
- Select your filing status.
- Enter your annual income (MAGI) before this deduction, and your qualified cash tips for the year.
- Enter your marginal federal tax rate (the bracket your last dollar of income falls in) to estimate real dollar savings.
- Press Calculate to see your deduction after the income phase-out, and your estimated tax savings.
Frequently asked questions
What is the 'No Tax on Tips' deduction?
Signed into law as part of the One Big Beautiful Bill Act (OBBBA), it lets workers in traditionally tipped occupations deduct up to $25,000 of qualified cash tips from their federal taxable income each year, for tax years 2025 through 2028. It's an above-the-line deduction, so you get it whether you take the standard deduction or itemize.
Does this mean tips are completely tax-free?
No, tips still count as income and Social Security/Medicare (FICA) taxes still apply on them. This deduction only reduces the federal income tax portion, and only up to $25,000 per return, only for jobs that customarily and regularly received tips as of December 31, 2024.
What happens if I earn a high income?
The deduction phases out once your modified adjusted gross income (MAGI) exceeds $150,000 (single filers) or $300,000 (joint filers), it shrinks by $100 for every $1,000 of income above that threshold, and disappears completely at $400,000/$550,000.
How long is this deduction available?
It applies to tax years 2025, 2026, 2027 and 2028 only, and is scheduled to expire after December 31, 2028, unless Congress extends it.