No Tax on Tips Calculator

The One Big Beautiful Bill Act (OBBBA) created an above-the-line federal income tax deduction for qualified tip income, up to $25,000 per year. This means tips are still reported as income but then deducted, reducing your federal income tax. The provision is temporary, covering tax years 2025-2028. Source: IRS OBBBA Guidance.

Yes. The no-tax-on-tips provision only applies to federal income tax. FICA payroll taxes — Social Security (6.2%) and Medicare (1.45%) — still apply to all tip income. Self-employment tax also still applies for self-employed tipped workers.

Yes. The deduction phases out starting at $150,000 MAGI for single/head of household filers and $300,000 for married filing jointly. The deduction is reduced by $100 for every $1,000 above the threshold. For example, a single filer earning $200,000 would lose $5,000 of the deduction. Source: IRS.