No-tax-on-tips savings calculator
How much federal income tax does the new “no tax on tips” deduction save me?
How it works
- Add up the year's qualified tips: voluntary tips you report, not service fees.
- The deduction is up to $25,000 of tips a year (tax years 2025–2028). It can't be more than the profit from the work that earned the tips, and it shrinks by $100 for every $1,000 of income over $150,000 ($300,000 married filing jointly).
- Work out federal income tax with and without the deduction, using 2026 brackets, the standard deduction and the 20% business income deduction. The difference is the saving.
- Self-employment tax (15.3%) still applies to tips, and many states still tax them.
Worked example
A single driver with $12,000 in tips and $38,000 of other gig profit deducts all $12,000 of tips. Federal income tax drops from about $2,667 to $1,515: a saving of about $1,152. Self-employment tax of about $7,065 is unchanged.
2026 figures used
| Figure | 2026 | Source |
|---|---|---|
| Tips deduction cap | $25,000 a year, 2025–2028 | Federal Register: final rules on qualified tips |
| Phase-out | $150,000 single / $300,000 joint | Federal Register: final rules on qualified tips |
| Standard deduction (single) | $16,100 | IRS 2026 inflation adjustments |
| Self-employment tax | 15.3% | IRS: self-employment tax |
Try it with your own numbers
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For planning, not tax advice. Check with a tax professional for your situation. Figures as of October 2026; updated each January. Source list: nettakehome.com/guides/2026-tax-numbers/