No Tax on Tips Calculator (2025–2028)
For tax years 2025–2028, the One Big Beautiful Bill Act lets tipped workers deduct up to $25,000 of qualified tips from federal taxable income. The cap phases out above $150,000 of income ($300,000 joint). A worker with $30,000 of tips and $80,000 of total income deducts the full $25,000 cap and saves about $4,578 in federal tax.
Estimate your tips deduction
The rule, in plain words
- Amount: deduct your qualified tips, up to $25,000 a year.
- Phase-out: the cap falls by $100 per $1,000 of modified AGI over $150,000 (single) / $300,000 (joint).
- Years: tax years 2025 through 2028.
- Qualified tips only: voluntary cash or charged tips (including pooled tips) that are reported to the IRS. Mandatory service charges do not count.
- Qualified occupations: the tips must be earned in an occupation that traditionally and customarily received tips, per the Treasury Department's list. Tips tied to specified service businesses (health, law, accounting, consulting, finance and similar) are excluded.
- Conditions: Social Security number required; married taxpayers must file jointly; available whether or not you itemize.
- Still applies: Social Security and Medicare tax on tips is unchanged, and most states still tax tips in full.
Worked example
Single filer, $30,000 of qualified tips, $80,000 total income:
| Qualified tips | $30,000.00 |
|---|---|
| Cap (no phase-out below $150,000) | $25,000.00 |
| Deduction | $25,000.00 |
| Estimated federal tax saving | $4,577.50 |
Frequently asked questions
What is the 'no tax on tips' deduction?
For tax years 2025-2028, Internal Revenue Code Section 224 lets workers deduct up to $25,000 of qualified tips from federal taxable income. It is a deduction claimed on your return — tips are still subject to Social Security and Medicare tax, and employers still report them.
What counts as a 'qualified tip'?
Cash and charged tips that a customer pays voluntarily, including tips shared through a tip pool. Mandatory service charges added by the business are not tips and do not qualify. The tips must be reported (for example on Form W-2 or Form 4137) and you must have a Social Security number.
What is the qualified-occupation caveat?
The deduction is limited to tips received in occupations that traditionally and customarily received tips — the Treasury Department published a proposed list of qualifying occupations (covering fields like food and beverage, hospitality, personal services, delivery and transportation). Tips connected with a 'specified service trade or business' (such as health, law, accounting, consulting or financial services) do not qualify. If your job is a classic tipped occupation — server, bartender, barista, driver, stylist — you are the intended beneficiary.
How does the phase-out work?
The $25,000 cap is reduced by $100 for every $1,000 of modified AGI above $150,000 (single) or $300,000 (married filing jointly), reaching zero at $550,000 for joint filers. Married filing separately filers cannot claim the deduction.
Do I have to itemize?
No — the deduction is available on top of the standard deduction. Married taxpayers must file a joint return to claim it.
How much is the deduction worth to me?
It is worth your deduction multiplied by your marginal tax rate, roughly. A $25,000 deduction saves about $5,500 in the 22% bracket and about $3,000 in the 12% bracket. This calculator works out the exact figure from the 2025 brackets instead of rounding with a single rate.