No Tax on Tips Calculator
How much of your tip income you can deduct under the "no tax on tips" rule for 2025 to 2028, after the income phase-out, and the federal tax it saves.
The tips deduction on $20,000 of tips, by income
| Modified AGI | Single: deduction | Single: tax saved | Joint: deduction |
|---|---|---|---|
| $50,000 | $20,000 | $2,400 | $20,000 |
| $100,000 | $20,000 | $4,400 | $20,000 |
| $150,000 | $20,000 | $4,800 | $20,000 |
| $175,000 | $20,000 | $4,800 | $20,000 |
| $200,000 | $20,000 | $4,800 | $20,000 |
| $350,000 | $5,000 | $1,750 | $20,000 |
How this calculator works
Qualified tips are deductible up to $25,000 a year (26 U.S.C. 224). The cap falls by $100 for each full $1,000 of modified AGI above $150,000 ($300,000 on a joint return), reaching zero at $400,000 ($550,000 joint).
Deductions lower federal taxable income whether you itemize or take the standard deduction. They don't lower Social Security or Medicare tax, and states decide for themselves whether to follow them.
The tax saved is estimated at 2026 federal rates with the standard deduction, treating your modified AGI as your income.
What it assumes
- Tips must be voluntary, in an occupation the IRS lists as customarily receiving tips, and reported on a W-2, 1099 or Form 4137. Service charges added to a bill don't count.
- You need a valid Social Security number, and married couples must file jointly.
Questions people ask
How does no tax on tips work?
From 2025 through 2028, workers in tipped occupations can deduct up to $25,000 of qualified tips from federal taxable income. It is a deduction, not an exclusion: tips are still reported, and Social Security and Medicare tax still applies to them.
How much tax will I save on my tips?
Your deduction times your marginal federal rate. A single filer with $50,000 of income and $12,000 of tips saves about $1,440.
Is there an income limit?
The deduction shrinks by $100 for every $1,000 of modified AGI over $150,000 ($300,000 for joint filers), so it is gone at $400,000 ($550,000 joint).
Do I still pay Social Security and Medicare on tips?
Yes. The deduction only lowers federal income tax.
Does my state tax tips?
Each state decides whether to follow the federal deduction, so state income tax may still apply to your tips.
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Sources
Updated by the RateHerald team. The maths is tested against worked examples; report a problem.