2026 No Tax on Tips Calculator

How the No Tax on Tips Deduction Works

The One Big Beautiful Bill Act (P.L. 119-21 §70201) added a new Internal Revenue Code §224, which creates an above-the-line deduction for qualified tips for tax years 2025 through 2028. Eligible workers can deduct up to $25,000 of cash tips per year from their federal income tax base. Both standard-deduction filers and itemizers can take it, and you claim it on the new IRS schedule for OBBBA deductions alongside your Treasury Tipped Occupation Code (TTOC).

Headlines call it "no tax on tips," but the statute only touches federal income tax. Social Security, Medicare, and Additional Medicare are all still owed under IRC §3121(q). That's the biggest misconception about the law, and the reason this calculator shows FICA as a first-class output. §224(h) sunsets the deduction for years beginning after December 31, 2028, so 2028 is the last year you can claim it unless Congress renews.

Qualified Tipped Industry Occupations (IRS TTOC List)

The Treasury Department finalized the full list of 71 qualifying occupations in T.D. 10044 (April 2026), covering eight TTOC categories: beverage and food service, hospitality and guest services, home services, personal services, personal appearance and wellness, recreation and instruction, entertainment and events, and transportation and delivery. The calculator's dropdown covers the 20 most common titles: servers, bartenders, hairdressers, rideshare drivers, gaming dealers, and similar roles.

Your role must appear on the list. Nurses, accountants, and social-media creators who receive tips are not eligible even when tipped. Workers employed in a Specified Service Trade or Business (SSTB, §199A(d)(2)) are also excluded, which is why gambling-facility managers are out but dealers are in. If your occupation isn't on the list, the deduction drops to zero and FICA remains fully owed.

Income Phase-Out Mechanics

If your Modified Adjusted Gross Income (MAGI) exceeds $150,000 (single / HoH) or $300,000 (MFJ), the base deduction is reduced by $100 for every $1,000 (or fraction of) of MAGI over the threshold. A $25,000 base deduction phases fully out at MAGI $400,000 single / $550,000 joint. Smaller claims zero out sooner: a $10,000 claim phases out at $250,000 single / $400,000 joint.

Worked example: a single filer with $180,000 MAGI is $30,000 over the $150K threshold, so 30 × $100 = $3,000 of phase-out. A $20,000 base deduction becomes $17,000, and a $25,000 base becomes $22,000. Married couples get the much larger $300K ceiling, which is why the filing-status chip changes the numbers meaningfully for high-earning households.

FICA Still Applies: The Common Misconception

Tipped workers still pay 6.2% Social Security (up to the 2026 wage base of $184,500) and 1.45% Medicare on every tip dollar, plus the 0.9% Additional Medicare Tax above $200,000 single / $250,000 MFJ. State income tax also continues to apply unless your state specifically conforms to §224, which most have not done as of April 2026.

Why this matters: a $20,000 tip deduction at the 12% bracket saves $2,400 in federal income tax, but the worker still owes about $1,530 in FICA on those same tips. The tool shows both numbers so you can see the real effect, not just the headline.

Reference Scenarios: Example Tip Earners

Ten illustrative scenarios using 2026 brackets and the $16,100 / $32,200 / $24,150 standard deductions. Fed Savings is the bracket math savings (federal tax before minus after). FICA is still owed on top. Use the live calculator above to compute your own numbers.

2026 Federal Tax Brackets (Used by This Calculator)

Source: IRS Rev. Proc. 2025-32. The calculator applies these progressively to MAGI minus your standard deduction (and the qualified tip deduction for the "after" figure).

2026 standard deductions: $16,100 single, $32,200 MFJ, $24,150 HoH. Source: IRS Rev. Proc. 2025-32 (IR-2025-103). Social Security wage base: $184,500 (SSA 2026 COLA).

Important Limitations

This calculator approximates MAGI as the sum of your inputs and does not model above-the-line adjustments, §911/931/933 foreign-income exclusions, or SSTB exclusions that may disqualify tips received from a Specified Service Trade or Business. FICA shown here does not include the 0.9% Additional Medicare Tax on high earners, and graduated state tax on tips is not modeled. The deduction sunsets after tax year 2028 (§224(h)). Consult a tax professional before relying on these numbers.

For related calculations, see the Tax Bracket Calculator, the Bonus Tax Calculator, the Self-Employment Tax Calculator, or the Social Security Tax Calculator for the 2026 FICA wage base math.