No tax on tips calculator

The part the name hides

A deduction on the income-tax line — payroll tax untouched

Conditions

• Your occupation must be on the Treasury list of occupations that customarily and regularly received tips on or before 31 December 2024 — pick it above. A job that is not on the list has no qualified tips, however much it is tipped.
• Only voluntary tips count: paid without compulsion, not negotiated, and set by the customer. Service charges and automatic gratuities added to a bill are not qualified tips, even when they are passed on to staff.
• Tips must be paid in a cash medium — cash, card, check, gift card, a mobile app denominated in dollars, casino chips. Meals, tickets and digital assets are not.
• Amounts a manager or supervisor receives through a tip pool are excluded; tips they receive directly for services in a listed occupation still count.
• Not available if your employer is a specified service trade or business under section 199A, or if you are self-employed in one; and a self-employed deduction cannot exceed the net income of the business the tips came from.
• You (and a tipped spouse) need a valid Social Security number, and a married couple must file jointly — married filing separately cannot claim it.
• The tips must be reported: on a W-2 or 1099, on a statement from a payment platform, or by you on Form 4137. It is claimed on Schedule 1-A and taken whether or not you itemise.

The list

The 71 occupations whose tips qualify

Table 1 to 26 CFR § 1.224-1(h), from the final regulations published on 13 April 2026 and effective 12 June 2026 — the Treasury Tipped Occupation Code, the occupation, and the regulation’s own examples of who it means. Assistants and apprentices are included where they perform the same services. If your job is not here, your tips are not qualified tips.

Questions

Are tips really tax free now?

No — the name is doing the same work it does for overtime. What exists is a deduction of up to $25,000 of qualified tips against your taxable income, for tax years 2025 through 2028. A deduction is worth your marginal rate: at 22%, $25,000 of deduction is about $5,500 of tax. Social Security and Medicare are still withheld from every dollar of tips, because the deduction is on the income-tax side of the return only.

Which jobs qualify for the no tax on tips deduction?

Only the occupations on the Treasury list — 71 of them, in eight categories, published as Table 1 to 26 CFR § 1.224-1(h) in the final regulations of 13 April 2026. Restaurant and bar staff, casino workers, hotel staff, hairdressers and nail technicians are the obvious ones; the list also reaches plumbers and electricians doing home work, tutors, wedding photographers, pet groomers, rideshare drivers, movers and digital content creators. The full table is on this page.

Do service charges and automatic gratuities count?

No. The regulation is explicit: qualified tips must be "paid voluntarily and without any consequence in the event of nonpayment", must not be negotiated, and must be set by the customer. Service charges, automatic gratuities and any mandatory amount the establishment adds to a bill are not qualified tips "even if the amounts are subsequently distributed to employees". Anything the customer adds on top of a mandatory charge is.

What about tips from a tip pool?

They count — cash tips include amounts received "through a mandatory or voluntary tip-sharing arrangement, such as a tip pool". The exception is managers and supervisors: what they receive through a tip pool is excluded, though tips paid to them directly for services in a listed occupation still qualify.

At what income does the deduction stop?

It shrinks by $100 for every $1,000 of modified AGI above $150,000 ($300,000 filing jointly). The regulation's own example: a single filer with $26,000 of tips and $200,000 of MAGI is capped to $25,000 and then reduced by $5,000, to $20,000. The deduction reaches zero at $400,000 single and $550,000 joint.

Is the cap $25,000 per person or per return?

Per return — the regulation says the deduction "shall not exceed $25,000, regardless of filing status", and its Example 3 has a married couple with $15,000 and $20,000 of tips reduced together to $25,000. Two tipped spouses do not get $50,000.

Can I claim it if I am self-employed?

Yes, with two extra limits. The deduction cannot exceed the net income of the business the tips came from, and it is not available at all if that business is a specified service trade or business under section 199A — the same exclusion applies to an employee whose employer is one. Tips have to appear on a 1099 or platform statement, or be reported on Form 4137.

Does the deduction still apply if I take the standard deduction?

Yes. Like the overtime deduction it is claimed on Schedule 1-A and taken whether or not you itemise. You need a valid Social Security number, and if you are married you must file jointly — married filing separately cannot claim it.