No Tax on Tips Calculator 2026 β€” OBBBA Tip Deduction Savings

Calculate how much you save with the new OBBBA no-tax-on-tips deduction. See your federal and state tax savings on tip income up to $25,000.

$
Your regular salary or hourly wages (not counting tips)
$
Total tips reported on your W-2 (Box 7 or Box 1)
%
Enter 0 if you live in a no-income-tax state (TX, FL, NV, etc.)
$
Used to determine your MAGI for phase-out
Common tip amounts:
$0
Total Tax Savings
$0
Deductible Amount
$0
Federal Tax Saved
$0
State Tax Saved

OBBBA Tips Deduction: Tax Comparison

Item Without OBBBA With OBBBA Savings

How to Use This No-Tax-on-Tips Calculator

Enter your annual W-2 base wages (your regular salary, not including tips) and your total annual tip income. Add your state's income tax rate to see combined federal and state savings. The calculator automatically applies the OBBBA phase-out rules based on your MAGI and filing status.

Results update instantly β€” you'll see the deductible amount after phase-out, federal tax saved, state tax saved, and your effective tip tax rate (what percentage of your tip income you still pay in taxes).

The Formula

MAGI = Base Wages + All Tip Income + Other Income
Phase-Out Factor = 1 βˆ’ max(0, (MAGI βˆ’ threshold_start) / threshold_range)
Tip Deduction = min(tip_income, $25,000) Γ— Phase-Out Factor
Federal Tax Saved = Tip Deduction Γ— Marginal Federal Rate
State Tax Saved = Tip Deduction Γ— State Rate

Example

Server, Single, $40,000 base wages + $15,000 tips, 5% state tax:
MAGI: $55,000 β€” below $160,000 phase-out start, so full deduction applies
Tip deduction: min($16,100, $25,000) = $16,100
Marginal federal rate at $55,000 income: 22%
Federal savings: $15,000 Γ— 22% = $3,300
State savings: $15,000 Γ— 5% = $750
Total savings: $4,050

Who Qualifies?

The OBBBA no-tax-on-tips deduction applies to W-2 tipped employees in industries where tipping is customary β€” restaurants, bars, hotels, salons, taxi/rideshare, and similar. You must report your tips to your employer (required by law for tips over $20/month). Self-employed workers, gig workers paid on 1099, and highly compensated employees above the phase-out threshold do not qualify.

Extended

Tip Income Optimizer

See savings at different tip income levels and compare tipped vs non-tipped worker tax burden

See your tax savings at different tip income levels. Uses your current filing status and state rate from the main calculator.

Annual Tips Deduction Fed Savings State Savings Total Savings Effective Tip Rate

Tipped vs. Non-Tipped Worker Comparison

Same total income, different composition β€” see how the OBBBA deduction changes the after-tax picture.

ItemNon-Tipped WorkerTipped Worker (OBBBA)Advantage

Frequently Asked Questions

What is the OBBBA no-tax-on-tips deduction?
The One Big Beautiful Bill Act (OBBBA) introduced a deduction for tip income earned by W-2 tipped workers. Eligible employees can deduct up to $25,000 of tip income per year, reducing their taxable income and therefore their federal (and potentially state) income tax bill. The deduction phases out for higher earners.
Who qualifies for the no-tax-on-tips deduction?
To qualify you must: (1) receive tips as a W-2 employee in an industry where tipping is customary (restaurants, hospitality, personal care, etc.), (2) have MAGI below the phase-out threshold ($160,000 single / $320,000 married filing jointly), and (3) report your tips to your employer. Self-employed individuals and independent contractors do NOT qualify β€” the deduction is limited to employees who receive a W-2.
How does the phase-out work for the tips deduction?
The $25,000 deduction phases out proportionally for single filers with MAGI between $160,000 and $200,000 (a $40,000 range) and for MFJ filers with MAGI between $320,000 and $400,000 (an $80,000 range). For example, a single filer at $180,000 MAGI is halfway through the phase-out range and gets only 50% of the deduction ($12,500). At $200,000+ the deduction is $0.
Does the no-tax-on-tips deduction eliminate FICA taxes on tips?
No. The OBBBA deduction only reduces your federal income tax (and state income tax if your state conforms). FICA taxes β€” Social Security (6.2%) and Medicare (1.45%) β€” still apply to all wage income including tips. Your employer also continues to withhold FICA on your tip income. Only the income tax portion is affected.
Is the no-tax-on-tips deduction permanent?
As proposed, the OBBBA tip deduction is currently scheduled through 2028 with a potential sunset, similar to other provisions of the bill. Tax legislation can change, so check IRS.gov for the latest guidance. This calculator reflects the deduction as currently written in the OBBBA framework with a $25,000 annual cap.

Related Tax Calculators

πŸ’΅
Paycheck Calculator 2026
Calculate your take-home pay from any paycheck. Accounts for federal, state, FIC...
πŸ’°
Salary After Tax Calculator
Enter your annual salary and see your monthly and biweekly take-home pay after a...
⏰
Hourly Paycheck Calculator
Calculate your take-home pay from hourly wages. Include overtime, tips and bonus...
🎁
Bonus Tax Calculator
Calculate how much of your bonus you keep after federal and state taxes. Aggrega...
πŸ“
W-4 Withholding Calculator
Determine the correct W-4 allowances to avoid owing taxes or getting too large a...
πŸ›οΈ
FICA Tax Calculator
Calculate Social Security and Medicare tax on your wages. See employer and emplo...