No Tax on Tips and Overtime (2026): How Both Deductions Work
From 2025 to 2028 you can deduct up to $25,000 of tips and up to $12,500 of overtime ($25,000 joint). They’re deductions, not exemptions: Social Security, Medicare and state tax still apply.
Tips vs. overtime
| No tax on tips | No tax on overtime | |
|---|---|---|
| What counts | Tips customers chose to give, in a listed job | The extra half of time-and-a-half |
| On your 2026 W-2 | Box 12 code TP, box 14b | Box 12 code TT |
| Cap | $25,000 (same for couples) | $12,500; $25,000 joint |
| Income limit | Shrinks over $150k ($300k joint) | Shrinks over $150k ($300k joint) |
| Gig / 1099 | Yes, up to your profit | Rarely |
| Form | Schedule 1-A, Part II | Schedule 1-A, Part III |
Have both? Calculate them together
Each has its own cap, but your tax savings come from the total. This calculator figures it in one go, which is more accurate than adding two results.
Tips + overtime calculator
Private: runs in your browserEstimate of federal income tax only. Not tax advice.
Pick the right tool
- Only overtime, or estimating from hours: overtime calculator
- Only tips, including Form 4137 or box 14b: tips calculator
- Just got your W-2: what code TT means and code TP and box 14b
Frequently asked questions
Is there really no tax on tips and overtime?
Not quite. Both are federal income tax deductions for 2025 through 2028, not exemptions. Social Security and Medicare tax still apply, and most states tax them as usual.
Can I take both deductions?
Yes. If you earn qualified tips and qualified overtime, you can claim both on Schedule 1-A: tips in Part II (up to $25,000) and overtime in Part III (up to $12,500, or $25,000 joint).
Is the income limit shared between the two?
No. Each deduction has its own phase-out: $100 less for every full $1,000 of modified AGI over $150,000 ($300,000 joint), worked out separately.
Do I need to itemize?
No. Both deductions are available whether you take the standard deduction or itemize.
Which years does this apply to?
Tax years 2025, 2026, 2027 and 2028. Unless Congress extends them, both deductions end after 2028.
What do I need from my W-2?
For 2026, box 12 code TT (qualified overtime), box 12 code TP (cash tips reported to your employer) and box 14b (your tipped occupation code).
Related tools and guides
- No tax on overtime calculatorW-2 code TT or an hours estimate, cap, phase-out and tax saved.
- No tax on tips calculatorW-2 code TP, box 14b and 1099 tips, with the net-profit limit.
- W-2 box 12 code TTWhat code TT means, and what to do if it is missing or wrong.
- W-2 code TP and box 14bCash tips reported to your employer and your occupation code.
- No tax on tips for gig drivers1099-K and 1099-NEC tips, the net-profit limit, and SE tax.
- IRS tipped occupations listAll 71 Treasury Tipped Occupation Codes, searchable.
- Schedule 1-A guidePart II (tips) and Part III (overtime), line by line.
- Double time and state overtimeDouble time, daily overtime, contracts: what counts.