Tips & Overtime Calculator

How much is your tip and overtime deduction actually worth?

The One Big Beautiful Bill Act lets many workers deduct qualified tips and qualified overtime for tax years 2025 through 2028. Both calculators below follow IRS Schedule 1-A line by line, so you can check every number against the real form.

  • Only the premium counts

    Overtime is the half in time-and-a-half, not the whole payment. Ten hours at $30 is $450 of pay but a $150 deduction.

  • The caps differ

    Tips cap at $25,000 per return and do not double when married. Overtime caps at $12,500, and does double to $25,000.

  • Your payroll taxes do not change

    Both deductions reduce income tax only. Social Security and Medicare come out of the same wages as before.

Tip deduction

Up to $25,000 of qualified tips, for occupations on the Treasury tipped-occupation list.

Usually the same as your AGI unless you have foreign or Puerto Rico income.

From W-2 box 7, plus any tips you reported on Form 4137. For 2026 W-2s this is box 12, code TP.

From Form 1099-NEC box 1, 1099-MISC box 3, or 1099-K box 1a.

Eligibility

Treasury published the final list of qualifying occupations in April 2026. Servers, bartenders, barbers, valets and gambling dealers are on it; most salaried roles are not.

Law, accounting, health, consulting, financial services and similar fields are excluded.

Your deduction

$14,000

How this figure is computed, by Schedule 1-A line
Line 6Qualified amount$14,000
Line 7After the $25,000 cap$14,000
Line 10Income above $150,000$0
Line 11Whole $1,000 steps (rounded down)0
Line 12Phase-out reduction−$0
Line 13Deduction$14,000

This reduces your taxable income, not your income tax bill directly, and it does not reduce Social Security or Medicare tax at all.

The $25,000 tip cap is per return and is not doubled on a joint return, unlike the overtime cap.

Overtime deduction

Up to $12,500 of the FLSA-required overtime premium, or $25,000 on a joint return.

Hours past 40 in a week, added up across the year. Short weeks do not cancel out long ones — each week stands alone.

Your base rate, not your time-and-a-half rate.

You were paid $9,240 for those hours, but only the $3,080 premium qualifies.

The deduction covers the “half” in time-and-a-half — 220 hours × 0.5 × $28 — never the whole overtime payment. This is the figure most calculators get wrong.

Eligibility

Salaried-exempt workers have no qualified overtime at all. Overtime required only by state law — California's daily overtime, for instance — does not qualify either.

Your deduction

$3,080

How this figure is computed, by Schedule 1-A line
Line 14cQualified amount$3,080
Line 15After the $12,500 cap$3,080
Line 18Income above $150,000$0
Line 19Whole $1,000 steps (rounded down)0
Line 20Phase-out reduction−$0
Line 21Deduction$3,080

This reduces your taxable income, not your income tax bill directly, and it does not reduce Social Security or Medicare tax at all.

A single filer’s overtime deduction is gone entirely at $275,000 of income — not $400,000 like tips, because the smaller cap runs out sooner against the same phase-out.