Estimate your federal tax savings from the OBBBA tip deduction. Deduct up to $25,000 of qualified tips per return from your federal taxable income — if your occupation is on the Treasury list and your tips are voluntary.
Work overtime too? Pair this with the no-tax-on-overtime calculator — the deductions stack on the same Schedule 1-A.
The $25,000 cap is per return — it does not double for joint filers.
Voluntary cash, card, and shared/pooled tips reported to your employer.
Used to check phase-out and estimate your bracket.
401k, HSA, student loan interest, etc.
Treasury published a closed list of roughly 70 occupations across eight categories — food and beverage service (servers, bartenders, baristas), appearance and wellness (hairstylists, barbers, massage therapists, nail techs), hospitality, home services, personal services, personal appearance, recreation (golf caddies, gaming dealers), and transportation and delivery (taxi and rideshare drivers, valets, delivery drivers). Digital content creators made the list too. If a role isn't on the list, it doesn't qualify — the final rules explicitly rejected case-by-case additions.
| Filing Status | Max Deduction | Phase-out Starts | Complete Phase-out |
|---|---|---|---|
| Single / HoH | $25,000 | $150,000 | $400,000 |
| Married Filing Jointly | $25,000 | $300,000 | $550,000 |
For tax year 2026, employers must report qualified tips in W-2 Box 12 under code TP and the employee's Treasury tipped-occupation code in new Box 14b — both appear on W-2s issued in early 2027. Your paycheck doesn't change during the year: tips remain subject to federal withholding, Social Security, and Medicare, and you claim the deduction on Schedule 1-A when you file. For 2025 returns, employers weren't required to break tips out — you self-reported from your own records.
Retroactively on January 1, 2025 — signed July 4, 2025 as part of the OBBBA, effective for tax years 2025 through 2028. Workers claimed it for the first time on 2025 returns filed in early 2026. Unless Congress extends it, it ends after tax year 2028.
No — keep reporting every tip. Tips remain subject to Social Security and Medicare (FICA), state income tax in most states, and normal federal withholding during the year. The benefit is a federal income tax deduction at filing time of up to $25,000 of qualified tips. Under-reporting tips would shrink both your Social Security earnings record and the deduction you're entitled to claim.
Your deductible tips times your marginal rate. A server with $18,000 in reported tips and $55,000 total income deducts the full $18,000 and saves roughly $2,200–$4,000 in federal tax depending on bracket. At the $25,000 cap in the 22% bracket, the ceiling is about $5,500 per year. Run your own numbers in the calculator above.
Generally no. The final rules require tips to be voluntary — the customer must be able to reduce the amount to zero. A mandatory 18% large-party gratuity is a service charge, not a qualified tip. Card tips are fine, and point-of-sale prompts count as long as a no-tip option exists. Tips paid in cryptocurrency are explicitly excluded.
Yes — they're separate deductions on the same Schedule 1-A and they stack. A bartender who works overtime can deduct qualified tips (up to $25,000) and the FLSA overtime premium (up to $12,500/$25,000) in the same year, subject to each deduction's own phase-out. Estimate the overtime side with the no-tax-on-overtime calculator and the raw pay with the overtime calculator.