Estimate the OBBBA "no tax on tips" deduction — up to $25,000 of qualifying tip income deducted from taxable income, phased out above $150K (single) / $300K (MFJ). Federal tax savings depend on your marginal bracket.
Detailed instructions, formula notes, and US-context guidance shown in the calculator above.
Disclaimer: Estimate only. Consult a qualified professional for decisions with major financial, legal, or health consequences.
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Calculator information
📋 How to use this calculator
- Enter your annual tip income in dollars. Only cash, charged, and pooled tips from qualifying occupations count.
- Select filing status — Single, Married Filing Joint, or Head of Household.
- Enter total Modified Adjusted Gross Income (MAGI) including the tip income itself.
- Review the deduction amount, phase-out impact, and estimated federal tax savings at your marginal bracket.
- Tip: FICA (Social Security + Medicare 7.65%) still applies — only federal income tax is reduced.
- Tip: State income tax follows separate state law — some conform, some don't.
🧮 OBBBA Tip Deduction (Tax Years 2025-2028)
Deduction = min(Tips, $25,000) x (1 - max(0, (MAGI - PhaseStart) / PhaseRange))
- Tips: qualifying tip income (cash, credit, pooled)
- Cap: $25,000 single/joint/HOH
- PhaseStart: $150,000 (single/HOH), $300,000 (MFJ)
- PhaseRange: $75,000 (single/HOH), $150,000 (MFJ)
- Federal tax savings = Deduction x Marginal_Bracket
Treasury publishes a list of qualifying tipped occupations (food service, beauty, valet, etc.). FICA still applies to all tips. Deduction is an above-the-line adjustment, not an itemized deduction.
💡 Worked example: Server in Texas earning $20K tips, $55K total income
Given:- Filing status: Single
- Annual tip income: $20,000
- Other W-2 wages: $35,000
- Total MAGI: $55,000 (below $150K phase-out threshold)
- 2026 marginal federal bracket at this income: 12%
Steps:- Eligible tip deduction = min($20,000, $25,000) = $20,000
- MAGI $55,000 < $150,000 phase-out start → 100% allowed
- Federal tax savings = $20,000 x 12% = $2,400
- FICA still owed on tips: $20,000 x 7.65% = $1,530 (unchanged)
Result: $2,400 in federal income tax saved; net annual benefit equals one extra week of take-home pay for a typical server.
❓ Frequently asked questions
Which occupations qualify for the tip deduction?
The Treasury Department publishes a list of qualifying tipped occupations including waitstaff, bartenders, baristas, food delivery, valet, hairstylists, nail technicians, massage therapists, casino dealers, golf caddies, and others where tipping is customary. White-collar bonuses or commissions do not qualify. The list was finalized in mid-2025 and may expand. Tip income reported on Form W-2 box 7 or Form 4137 is generally eligible if your occupation is listed.
Does the deduction reduce my FICA (Social Security and Medicare) taxes?
No. The OBBBA tip deduction reduces only federal income tax. FICA (7.65% employee share — 6.2% Social Security + 1.45% Medicare) still applies to your full tip income. So if you earn $20,000 in tips, you still owe $1,530 in FICA. The deduction also doesn't reduce your Social Security earnings record — your future SSA benefit is still based on the full tip amount.
What's the difference between this and the tipped wage credit my employer claims?
Your employer separately claims the IRC §45B FICA tip credit on their corporate return — that's their tax break, not yours. The OBBBA personal tip deduction is YOUR break on YOUR personal return. Both exist simultaneously and don't conflict.
If I'm a tipped worker but my MAGI is $200,000 due to a second job, can I still claim it?
Partially. At $200,000 single MAGI, you're $50,000 into the phase-out range ($150K-$225K), so you lose 67% of the deduction. With $20,000 tips, you'd get a deduction of $20,000 x 33% = $6,600, not the full $20,000. Above $225,000 single MAGI, the deduction is fully phased out.
Is this permanent, or does it expire?
Like most OBBBA provisions, the tip deduction is currently scheduled to expire after tax year 2028 unless Congress extends it. Plan accordingly — don't make multi-year financial commitments assuming this benefit continues indefinitely.
📚 Sources & references
Last updated: May 23, 2026