Federal taxable-income deduction, available whether or not you itemize. This is a deduction, not a tax credit or an estimate of tax savings. Social Security and Medicare taxes still apply under the usual rules.
FORM TIPS-OT-2026 · DEDUCTION REPORTREV. OCT 2026
No Tax on Tips & Overtime Calculator (2026)
Estimate your qualified tips and overtime deductions for 2026. See separate caps, MAGI phase-out steps and named eligibility reasons, then compare filing statuses. Enter the qualified overtime premium, not gross overtime pay.
Last updated: November 7, 2026
Deduction context
| Qualified tips cap: | $25,000 per return |
|---|---|
| Qualified overtime cap: | $12,500 / $25,000 MFJ only |
| MAGI phase-out threshold: | $150,000 (Single / HoH / QSS) / $300,000 (MFJ) |
| Reduction for each deduction: | $100 per completed $1,000 of MAGI excess (round down) |
| Tips fully phased out at the maximum cap: | $400,000 (non-joint) / $550,000 (MFJ) |
| Overtime fully phased out at the maximum cap: | $275,000 (non-joint) / $550,000 (MFJ) |
| Availability: | Itemizers and non-itemizers; tax years 2025–2028 |
| Married filing separately: | Not eligible for either deduction |
Context only — IRC §§224/225 and Schedule 1-A. Smaller reported amounts may be fully phased out before the maximum-cap endpoints. QSS uses non-joint amounts.
For 2026, the IRS transition relief (Notice 2025-69) treats tips from a specified service business as qualified if your occupation is on the IRS list.
Notice 2025-62 provided reporting-penalty relief for tax year 2025 only; it is not a 2026 reporting waiver. Use qualified statement amounts for 2026 and the published occupation list.
Self-employed business tips have a net-income limit under §224(c) that is not modeled. This estimate assumes statement-reported qualified amounts.
ESTIMATED · NOT ADVICE
Your 2026 tips and overtime report
ILLUSTRATION · NOT OFFICIAL
FULL DEDUCTION
| Qualified tips deduction (§224) | $8,000.00 |
|---|---|
| Qualified overtime deduction (§225) | $3,000.00 |
- MAGI entered
- $60,000.00
- Tips entered
- $8,000.00
- Overtime premium entered
- $3,000.00
- Phase-out threshold
- $150,000.00
- MAGI excess
- $0.00
- Completed $1,000 increments
- 0
- Reduction per deduction
- $0.00
Filing status comparison
Current MAGI, reported amounts and eligibility confirmations held fixed. Filing status must reflect your actual situation.
| Filing status | Tips | Overtime | Total deduction |
|---|---|---|---|
| Single | $8,000.00 | $3,000.00 | $11,000.00 |
| Head of household | $8,000.00 | $3,000.00 | $11,000.00 |
| Married filing jointly | $8,000.00 | $3,000.00 | $11,000.00 |
| Qualifying surviving spouse | $8,000.00 | $3,000.00 | $11,000.00 |
Documentation checklist
- Applicable Forms W-2, 1099 or settlement statements identifying qualified tips and qualified overtime premium; Form 4137 for applicable reported tips.
- Records showing voluntary cash tips, including charged tips or tip-sharing amounts, and your occupation on the IRS published list.
- Payroll records separating the FLSA §7 premium from the regular rate and gross overtime pay.
- MAGI support, required Social Security numbers on the return, and Schedule 1-A with the current return instructions.
- For self-employed tips, records needed to apply the additional §224(c) net-income limit outside this estimate.
FAQ
Does “No Tax on Tips & Overtime” mean all of that pay is tax-free?
These are federal income tax deductions, not credits or a payroll-tax exemption. Social Security and Medicare taxes still apply under the usual rules. The overtime deduction covers only the qualified FLSA section 7 premium above the regular rate, generally the extra half-time portion, not gross overtime pay. This calculator estimates deductions, not tax savings.
How does the $1,000 phase-out step work?
Each deduction is reduced by $100 for every completed $1,000 of MAGI above $150,000, or $300,000 for married filing jointly. Schedule 1-A lines 11 and 19 round the number of $1,000 increments down. A $999 excess produces no reduction; a $1,500 excess produces a $100 reduction to each capped deduction, without reducing either below zero.
Does qualifying surviving spouse status use the joint amounts?
No. Only married filing jointly uses the $300,000 MAGI threshold and $25,000 overtime cap. Single, head of household and qualifying surviving spouse use a $150,000 threshold and $12,500 overtime cap. The qualified tips cap is $25,000 for all eligible filing statuses. Married filing separately is ineligible.
What if my employer or business is a specified service business?
For 2026, Notice 2025-69 §III.A provides SSTB transition relief for employees in an occupation on the IRS tips list and extends that relief to non-employees. The April 13, 2026 occupation-list final rule does not resolve the SSTB exclusion. This TY2026 estimator therefore has no SSTB exclusion checkbox or gate; the occupation-list and other requirements still apply.
Can I claim these deductions without itemizing?
Yes. IRC §63(b)(5) and (6) allow these deductions for non-itemizers. They are subtracted in computing taxable income; this tool does not treat them as an AGI adjustment. The deductions are temporary: they do not apply to taxable years beginning after December 31, 2028. The deducted amounts are excluded from qualified business income under §199A.
What does this estimate leave out?
Use qualified amounts reported on the applicable statements or Form 4137. Self-employed business tips have an additional net-income limit under §224(c), which is not modeled here. This tool does not determine whether a payment is voluntary cash tips, whether your work is FLSA-covered, or the legal eligibility of an occupation. It does not calculate income tax savings, payroll taxes or state tax treatment.
Methodology
Authority and period. IRC §224 and §225, added by Pub. L. 119-21 §§70201/70202, apply for tax years 2025–2028. TY2026 caps are $25,000 for tips and $12,500 for overtime ($25,000 for MFJ only), without inflation indexing. Under §63(b)(5)/(6), non-itemizers are eligible. These deductions reduce taxable income, not AGI; deducted amounts are excluded from QBI under §199A.
Separate caps and completed increments. For each section independently, first cap the qualified reported amount. MAGI is AGI plus excluded foreign income under §§911, 931 and 933. The threshold is $300,000 only for MFJ; Single, HoH and QSS use $150,000. Reduction = $100 × floor(max(0, MAGI − threshold) / $1,000). Deduction = max(0, capped amount − reduction). Schedule 1-A lines 11 and 19 say: “If the resulting number isn't a whole number, decrease the result to the next lower whole number.” A sub-$1,000 excess has a zero reduction, but remains a PHASING OUT state. Maximum-cap endpoints are $400,000/$550,000 for tips and $275,000/$550,000 for overtime (non-joint/MFJ). Smaller reported amounts can run out earlier.
Eligibility and transition relief. MFS blocks both deductions (§224(f)/§225(e)); the required SSN must appear on the return (§224(e)/§225(d)). The published occupation requirement (§224(d)(1)) blocks only tips. Notice 2025-69 §III.A provides SSTB transition relief through all of 2026 for listed-occupation employees and, under §III.A.2, non-employees. The April 13, 2026 final rule, 91 FR 19037, does not address the §224 SSTB exclusion and reserves §1.224-1(g). There is no SSTB input or gate in this TY2026 model. Qualifying surviving spouse is not a joint return for these deduction amounts; see the Form 1040 instructions for Schedule 1-A.
Qualified amounts and scope. Tips must be reported on statements under §§6041(d)(3), 6041A(e)(3), 6050W(f)(2), 6051(a)(18), or Form 4137. Overtime must be reported under §6041(d)(4) or §6051(a)(19) and be the FLSA §7 premium above the regular rate, not gross overtime pay. The self-employed net-income limitation under §224(c) is not modeled; this estimate assumes statement-reported qualified amounts. Social Security and Medicare taxes remain subject to the usual rules. Notice 2025-62 reporting-penalty relief applies only to tax year 2025; it is not a 2026 reporting waiver.
Protected inputs and rounding. Full-string parsing accepts complete thousands-comma groups. Invalid or empty drafts remain visible with an error while retaining the last valid full amount. Input cents round half-up; negatives become zero and money is capped at $10,000,000. Subsequent operations use integer cents, including the final sum. Reset restores the C01 example and clears invalid drafts. Copy link includes the six current valid inputs. The filing-status comparison holds all other inputs fixed.
Sources: IRC §§224, 225, 63(b)(5)/(6) and 199A; Pub. L. 119-21 §§70201/70202; IRS Schedule 1-A and Form 1040 instructions; Notice 2025-69 §III.A; Notice 2025-62 (TY2025 only); Federal Register 2026-07104, April 13, 2026. Accessed November 7, 2026.Last updated: November 7, 2026 · 2026 qualified tips and overtime deduction illustration