No Tax on Tips & Overtime Calculator
The One Big Beautiful Bill Act created two new deductions for 2025–2028: up to $25,000 of tips and the premium half of overtime pay. This tool estimates what you actually save — applying the income phase-out most calculators skip, and telling you whether your state taxes it too.
Enter your tips, overtime premium, income, and marginal rate to estimate your federal tax saving. Tips are deductible up to $25,000; overtime up to $12,500 (single) or $25,000 (joint) — but only the FLSA premium half of time-and-a-half. Each deduction is reduced by $100 for every $1,000 of MAGI over $150,000 (single) / $300,000 (joint). FICA payroll tax still applies to every dollar.
Enter your tips, overtime, and income to estimate the federal tax you save under the 2025–2028 No Tax on Tips and No Tax on Overtime deductions — including the income phase-out and your state’s treatment.
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How to use No Tax on Tips & Overtime Calculator
- 1Pick your filing status and enter your qualified tips for the year.
- 2Enter your overtime premium, or estimate it from your hourly rate and overtime hours.
- 3Enter your modified AGI and choose your federal marginal tax rate.
- 4Select your state to see whether it taxes the same income, then read your estimated saving and warnings.
What actually counts — and what doesn't
No Tax on Tips (IRC §224) lets you deduct up to $25,000 of qualified tips per year. No Tax on Overtime (IRC §225) lets you deduct the overtime premium — the extra one-half of your regular rate under the Fair Labor Standards Act, not your entire overtime paycheck — up to $12,500 (single) or $25,000 (married filing jointly).
Both are above-the-line deductions for tax years 2025 through 2028, so you get them whether or not you itemize. Both require a valid Social Security Number on the return, and a married taxpayer must file jointly to claim either one.
The income phase-out most calculators miss
Each deduction shrinks by $100 for every $1,000 of modified AGI above $150,000 (single) or $300,000 (joint). Because the caps differ, the deductions disappear at different points: single-filer overtime is gone by $275,000 MAGI, while tips survive until $400,000; for joint filers both end at $550,000.
This tool applies that reduction to each deduction separately, which is why a high earner can still deduct some tips after their overtime deduction has already hit zero.
FICA and state tax still apply
These deductions cut federal income tax only. Social Security and Medicare (FICA) taxes are still withheld on every tip and overtime dollar, so your paycheck won't become entirely tax-free.
State income tax is separate. Nine states don't tax wage income at all, so tips and overtime are already state-tax-free there. In the rest, whether your state follows the federal deduction depends on state law — which varies and changes — so confirm with your state Department of Revenue.
Frequently Asked Questions
Does 'no tax on tips' mean my tips are completely tax-free?
No. It's an income-tax deduction of up to $25,000 of tips, not an exemption. Social Security and Medicare (FICA) taxes still apply to all your tips, and any tips above $25,000 stay fully taxable. High earners also lose the deduction gradually above $150,000 MAGI ($300,000 joint).
Is my whole overtime paycheck deductible?
No — only the premium portion counts. Under the FLSA, overtime is time-and-a-half, and the deduction covers just the extra 'half' (one-half of your regular rate for each overtime hour), not the base pay. The cap is $12,500 for single filers and $25,000 for joint filers.
Which years do these deductions cover?
Tax years 2025 through 2028. They were created by the One Big Beautiful Bill Act (P.L. 119-21) and are scheduled to expire after 2028 unless Congress extends them.
Do I still pay Social Security and Medicare tax on tips and overtime?
Yes. These deductions only reduce federal income tax. FICA payroll taxes (Social Security and Medicare) are still owed on every tip and overtime dollar.
Is my financial data uploaded anywhere?
No. Every calculator on this site runs entirely in your browser — nothing you enter is sent to a server.