No Tax on Tips Deduction Calculator
Work out your qualified tip deduction after the income phase-out, and what it saves in federal tax.
How this number is built
Doing it by hand
Step 1
Add up tips reported on your W-2 or on Form 4137 — voluntary cash and charged tips only.
Step 2
Exclude mandatory service charges and auto-gratuities; the IRS does not treat those as tips.
Step 3
Cap the figure at $25,000, which is the statutory maximum regardless of how much you earned.
Step 4
Subtract $100 for every $1,000 your MAGI exceeds $150,000, or $300,000 if filing jointly.
Step 5
Multiply what remains by your marginal rate to see the actual cash saving, then report it on Schedule 1-A.
What people ask next
Do I still pay payroll tax on tips?
Yes. The deduction reduces federal income tax only. Social Security and Medicare tax still apply to the full tip amount, and most states tax it too.
Do I need to itemise to claim it?
No. This is a below-the-line deduction available whether you take the standard deduction or itemise. It goes on the new Schedule 1-A.
How long does this last?
The provision applies to tax years 2025 through 2028 unless Congress extends it.
Searches this page answers
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