IRC §224 · tax years 2025–2028
Tip deduction calculator
Up to $25,000 of qualified tips, for occupations on the Treasury tipped-occupation list. Every figure below ties to a line on IRS Schedule 1-A.
Your deduction
$14,000
| 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.
How the deduction actually works
The One Big Beautiful Bill Act lets many tipped workers deduct qualified tips from taxable income for tax years 2025 through 2028. It is a below-the-line deduction, which means it reduces your taxable income but leaves your adjusted gross income untouched — a detail that matters enormously for whether your state follows suit.
You can claim it whether you itemise or take the standard deduction.
The $25,000 cap is not doubled when married
This trips people up constantly. Schedule 1-A line 7 reads simply “enter the smaller of the amount on line 6 or $25,000”, with no married-filing-jointly variant. A couple filing jointly shares one $25,000 ceiling between them. The overtime deduction behaves differently and genuinely does double, so it is easy to assume tips work the same way. They do not.
The income phase-out
Once your modified adjusted gross income passes $150,000 — or $300,000 filing jointly — the deduction shrinks by $100 for every whole $1,000 above the threshold. It is gone entirely at $400,000 single, or $550,000 jointly.
The word whole is doing real work there. Schedule 1-A line 11 instructs you to divide by $1,000 and decrease the result to the next lower whole number. Someone with $150,999 of income is $999 over the threshold, which floors to zero steps, and loses nothing at all.
Who does not qualify
- Married filing separately. A married taxpayer must file jointly to claim it — filing separately disqualifies you outright.
- Occupations off the Treasury list. Only jobs that customarily and regularly received tips on or before 31 December 2024 qualify. The final list was published in April 2026.
- Specified service trades or businesses. Tips earned through law, accounting, health, consulting, financial services and similar fields are excluded.
- Mandatory service charges. An automatic 18% added to a large party is not a voluntary tip and does not count.
If you are self-employed, your qualified tips are also capped at the net profit of the business that produced them.
Source: IRS Schedule 1-A (Form 1040), Additional Deductions, Part II · last reviewed