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2026 No-Tax-on-Tips & Overtime Deduction Estimator
Estimate your federal deduction for qualified tips and overtime for tax year 2026, including the income phase-out, and roughly what it saves you.
Enter your numbers and press Estimate.
The 2026 rules this estimator uses
| Tips (IRC §224) | Overtime (IRC §225) | |
|---|---|---|
| Maximum deduction | $25,000 per return | $12,500 ($25,000 joint) |
| Phase-out starts (MAGI) | $150,000 ($300,000 joint); reduced $100 per full $1,000 over | |
| What counts | Voluntary cash or charged tips in an occupation that customarily received tips on or before 12/31/2024 | Only the FLSA-required premium above your regular rate; state-law or union-contract overtime doesn't count |
| Years | Tax years 2025 through 2028 | |
Not eligible for the tips deduction: self-employed people in a specified service trade or business, and employees of an employer in one. Check the IRS list of tipped occupations.
Track it all year, not just at tax time
The 2026 New Deductions Workbook logs tips and overtime per paycheck, splits federal vs. California-only overtime, includes a Schedule 1-A estimator (check your result against the official form) and shows a withholding check.
See the Workbook, $15Not a substitute for the advice of an attorney or tax professional.
FAQ
How much can I deduct for tips in 2026?
Up to $25,000 of qualified tips per return. The limit is reduced by $100 for each full $1,000 of modified AGI over $150,000 ($300,000 if married filing jointly).
How much overtime can I deduct?
Only the premium portion the Fair Labor Standards Act requires (generally the “half” in time-and-a-half), up to $12,500, or $25,000 on a joint return, with the same income phase-out.
Can married couples filing separately claim it?
No. If you are married you must file a joint return, and the person who received the tips or overtime needs a Social Security number valid for employment.
Do I have to itemize?
No. Both deductions are available whether you take the standard deduction or itemize.
Does this lower my Social Security and Medicare tax?
No. They reduce federal income tax only. Payroll taxes still apply to tips and overtime.
Does California allow these deductions?
Not currently. California has not adopted them, so tips and overtime remain taxable on your California return.
Sources: IRS: How to take advantage of no tax on tips and overtime; Schedule 1-A (Form 1040) (phase-out math, lines 15–21); IRS Form 1040-ES (2026) (2026 tax rate schedules, standard deduction, W-2 codes TP/TT). Verified November 1, 2026.