# No tax on tips and overtime: key facts (checked 2026-11-10)

Source page: https://tax.wattflow.net/no-tax-on-tips-and-overtime-2026-numbers/

- Applies to tax years 2025-2028. These are federal income tax deductions, not exemptions.
- **Tips:** deduct up to $25,000 per return, including joint returns. Only voluntary tips in an occupation on the IRS list. Self-employed tips are limited to the business's net profit. Box 12 code TP; occupation code in box 14b. Claimed on Schedule 1-A, Part II.
- **Overtime:** deduct only the FLSA-required premium (0.5 × regular rate), up to $12,500 ($25,000 married filing jointly). Box 12 code TT (required from 2026). Claimed on Schedule 1-A, Part III.
- **Phase-out:** $100 for each full $1,000 of modified AGI over the threshold, for each deduction separately; threshold $150,000 ($300,000 joint).
- Married filing separately: not allowed. A Social Security number valid for employment is required.
- Not reduced: Social Security tax, Medicare tax, self-employment tax, most state income taxes.
- 2026 standard deduction: $16,100 single, $24,150 head of household, $32,200 married filing jointly.

## Sources
- [IRS — Schedule 1-A (Form 1040), Additional Deductions](https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf)
- [IRS FS-2026-13 — Questions and answers about the deduction for qualified overtime compensation](https://www.irs.gov/pub/taxpros/fs-2026-13.pdf)
- [IRS — General Instructions for Forms W-2 and W-3 (2026)](https://www.irs.gov/instructions/iw2w3)
- [IRS Rev. Proc. 2025-32 — 2026 tax rate tables and standard deduction](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [IRS — Occupations that customarily and regularly received tips (IRS.gov/TippedOccupations)](https://www.irs.gov/forms-pubs/occupations-that-customarily-and-regularly-received-tips-on-or-before-dec-31-2024)