No Tax on Tips Calculator
Estimate your federal No Tax on Tips deduction under the 2025 One Big Beautiful Bill Act. Qualified tips are deductible up to $25,000 per year, phasing out above $150,000 (single) / $300,000 (joint) MAGI. FICA still applies.
Inputs
Enter the minimum numbers needed to get a result.
Formula and example
Deduction = min(Annual Tips, $25,000) − Phase-out; Phase-out = $100 per $1,000 of MAGI over $150,000 ($300,000 joint).
With $18,000 in reported tips and MAGI of $45,000 (single): all $18,000 is under the $25,000 cap and below the phase-out, so the full $18,000 is deductible — saving about $2,160 at a 12% rate. You still owe ~$1,377 of FICA on the tips.
Methodology & assumptions
Last updated: 2026-06-21Calculation method
Implements the qualified tips deduction created by the One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) for tax years 2025–2028. Qualified tips in customarily-tipped occupations are deductible up to $25,000 per year, reduced by $100 for each $1,000 of MAGI above $150,000 ($300,000 joint). Tips must be reported (on a W-2, 1099, or directly). For self-employed recipients the deduction cannot exceed the net income of the business that generated the tips.
Data sources
Uses the numbers you enter and standard small-business finance formulas. Benchmark comparisons use HustleFin industry benchmark pages where available.
Limitations
Estimate only, not tax advice. The deduction reduces federal income tax only — Social Security and Medicare (FICA, 7.65%) still apply to tips, and tips must still be reported. Self-employed people in a Specified Service Trade or Business (SSTB) under Section 199A do not qualify, and the self-employed deduction is limited to the business's net income. Many states do not conform. Applies to tax years 2025–2028 unless extended. Verify on IRS.gov before filing.
Input definitions
- Annual reported tips: Total tips you received and reported during the tax year.
- Filing status: 0 = single / other, 1 = married filing jointly. Sets the MAGI phase-out threshold.
- Modified AGI (MAGI): Your modified adjusted gross income. The deduction phases out above $150,000 (single) / $300,000 (joint).
- Federal marginal tax rate: Your top federal income tax bracket, used to estimate dollars saved.
Frequently asked questions
How much of my tips can I deduct in 2025?+
Up to $25,000 of qualified tips per year. The deduction is reduced by $100 for every $1,000 your modified adjusted gross income exceeds $150,000 (single) or $300,000 (married filing jointly). Tips above $25,000 are not deductible.
Do I still have to report and pay FICA on tips?+
Yes. You must still report all tips, and Social Security and Medicare taxes (7.65%) still apply. The deduction only reduces your federal income tax — it does not make tips fully tax-free or remove the reporting requirement.
Can self-employed workers claim the tips deduction?+
Sometimes. Self-employed people can qualify, but the deduction cannot exceed the net income of the business that earned the tips, and those in a Specified Service Trade or Business (SSTB) under Section 199A — such as health, law, consulting, or performing arts — are not eligible.
Which jobs count as tipped occupations?+
The deduction applies to occupations that customarily and regularly received tips before 2025 (the IRS publishes a list). Typical examples include servers, bartenders, hairstylists, and delivery drivers. Tips must be voluntary and not negotiated, paid by customers in cash, card, or through tip-sharing.
How do I claim the no-tax-on-tips deduction?+
For 2025–2028 you claim it on the new IRS Schedule 1-A as an above-the-line deduction, so you can take it whether or not you itemize. Keep records of reported tips and confirm the current rules on IRS.gov or with a tax professional, since the IRS is still issuing guidance.
Continue the workflow
Estimate margin, convert margin to markup, then check the sales volume needed to break even.