The “no tax on tips” deduction, worked out exactly the way Schedule 1-A works it out: up to $25,000 of qualified tips per return, for tax years 2025 through 2028 — if the tips were reported, and the job is on the IRS list of traditionally tipped occupations.
Is the tipped job on the IRS list of traditionally tipped occupations?
The Treasury list (at IRS.gov/TippedOccupations) covers occupations that customarily received tips in 2024 — servers, bartenders, drivers, stylists and many more. Answer No if the work is a specified service trade or business (SSTB): health, law, accounting, consulting, athletics, financial or brokerage services and similar fields are excluded entirely.
Employee tips from your W-2 plus tips earned in your own business. If you are self-employed, enter the smaller of your tips and the business’s net income — the deduction cannot exceed the net income of the business that received them. The tips must have been reported (W-2, 1099, or Form 4137) and must be voluntary — a mandatory service charge is wages, not a tip.
For most people MAGI is simply your AGI (Form 1040, line 11) — the Schedule 1-A version only adds back a few foreign-income exclusions. Include the income you are deducting; the phase-outs run off this figure.
Your tips deduction
$18,000
From $18,000 of qualified tips at a MAGI of $45,000 (Single, tax year 2025).
Counted after the cap
$18,000
Your cap
$25,000
Phase-out cut
−$0
You deduct
$18,000
Your MAGI is $45,000. The deduction is whole until $150,000 and fully gone at $400,000.
| Line | Amount |
|---|---|
| Qualified tips for the year line 6 | $18,000 |
| Deduction cap (same for every filing status) line 7 | $25,000 |
| Your MAGI line 3 | $45,000 |
| Phase-out starts at line 9 | $150,000 |
| Income over the threshold line 10 | $0 |
| Full $1,000 steps over the threshold line 11 | 0 |
| Phase-out cut ($100 per step) line 12 | −$0 |
| Your tips deduction line 13 | $18,000 |
The tips deduction has more gates than the others. These are the four that decide it:
One cap of $25,000 covers the whole return — the same for a single filer and for a couple filing jointly with two tipped jobs. It is the only one of the four Schedule 1-A caps that does not double for joint filers.
Source: Schedule 1-A (2025), Part II, line 7.Tips qualify only in occupations the Treasury has listed as traditionally and customarily tipped as of 2024 — the final list (IR-2026-49) runs from food and beverage service to entertainment, hospitality, personal care and transport.
Source: IRS newsroom, One Big Beautiful Bill provisions — individuals and workers.If the tips were earned in a specified service trade or business — health, law, accounting, actuarial science, consulting, athletics, financial services, brokerage, or a business whose main asset is its workers’ reputation or skill — no deduction, for employees and owners alike.
Source: Schedule 1-A (2025), Part II caution; IRS guidance.Identical mechanics to the overtime deduction: from MAGI of $150,000 ($300,000 joint), lose $100 per full $1,000 over. A maximum $25,000 deduction is fully gone at $400,000 single / $550,000 joint.
Source: Schedule 1-A (2025), Part II, lines 9–12.A bartender reports $18,000 of tips on her W-2 for 2025; her MAGI is $45,000 and she files single. Bartending is squarely on the IRS occupation list, so Part II takes her $18,000, applies the $25,000 cap (no bite), checks MAGI against $150,000 (she is $105,000 under — cut $0) and gives her the full $18,000 on line 13.
Give the same bartender a MAGI of $250,000 — a big second income, say — and the excess is $100,000: 100 full steps × $100 = a $10,000 cut, leaving an $8,000 deduction. At $400,000 of MAGI nothing is left. The calculator above runs exactly this arithmetic.
The three ways this deduction comes back $0 — the calculator tests all of them:
Tips in an occupation that was not traditionally tipped in 2024 do not qualify, and neither do tips earned in an SSTB business. When in doubt, check the job against the IRS list, not against whether tips were actually paid.
As with the other Schedule 1-A deductions: married couples must file jointly. A separate return cannot claim it.
Unreported cash tips are not “qualified tips”. Tips count when they appear on a W-2 or 1099, or when you report them yourself on Form 4137.
Yes — $25,000 per return for everyone. It is the exception among the four new deductions: overtime doubles to $25,000 joint, seniors get $6,000 each, but tips stay at one $25,000 cap however many tipped jobs are on the return.
No. A service charge the business adds automatically (a large-party auto-gratuity, for example) is wages paid by the employer, not a voluntary tip, and does not qualify.
Two things: your tips must be reported (a 1099, or your own records reconciled on your return), and the deduction for business tips cannot exceed the net income of that business. Enter the smaller figure and this calculator handles the rest.
No. Schedule 1-A deductions are available on top of the standard deduction.
It applies to tax years 2025 through 2028 only.
Sources & verification. Schedule 1-A (Form 1040) 2025, Part II (irs.gov, form f1040s1a) — every line reference is to that form. IRS Tax Tip 2026-06, “One Big Beautiful Bill: how to take advantage of no tax on tips and overtime”, and the IRS newsroom page “One Big Beautiful Bill provisions: working families tax cuts for individuals and workers”, for the $25,000 cap, the occupation list and the SSTB exclusion.
Figures checked 4 November 2026 against the IRS sources above. This calculator is an estimator for planning, not tax advice.
Spotted a figure that looks wrong? Report it — accuracy is the whole point of these pages.
Related: tipped income still lands in a normal paycheck first — see the US Paycheck Calculator; the other four new deductions are in the hub.
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The “no tax on tips” deduction allows up to $25,000 of qualified tips per return for tax years 2025–2028 — the one new cap that does not double for joint filers. Tips must be voluntary, reported, and earned in an occupation on the IRS list of traditionally tipped occupations; tips in a specified service trade or business (SSTB) are excluded. This calculator checks those gates, then applies the cap and phase-out.
A bartender with $18,000 of reported tips and a MAGI of $45,000 deducts the full $18,000. The same tips at a MAGI of $250,000 deduct $8,000, after a $10,000 phase-out cut.
The calculation follows Schedule 1-A (2025) Part II exactly: the smaller of qualified tips or $25,000, reduced by $100 for each full $1,000 of MAGI over $150,000 ($300,000 joint). Tips still count as earned income for the EITC and Child Tax Credit.
No. Amounts the business adds automatically are wages, not voluntary tips, and do not qualify.
No. The tips cap is $25,000 per return for everyone, including joint filers with two tipped jobs.
Yes. Deducting tips on Schedule 1-A does not remove them from earned income for the EITC or Child Tax Credit.
The deduction is not available on a separate return.
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