Tools / Tip tax calculator

How tips are taxed in 2026

Tips are income, whether they come in cash, on a card, or through a tip pool. Three taxes can apply to them:

• Federal income tax. For 2025 through 2028, the No Tax on Tips deduction lets you subtract up to $25,000 of qualified tips. Most servers and bartenders earning under $150,000 (or $300,000 on a joint return) get the full deduction. After the $16,100 standard deduction for a single filer, a lot of tipped workers owe little or no federal income tax.
• Social Security and Medicare. The deduction does not touch these. Employees pay 7.65% on wages and reported tips, though the Social Security part stops at the $184,500 wage base. Self-employed workers pay both halves, 15.3%, on most of their profit, and get to deduct half of it.
• State income tax. Nine states don't tax wages at all. Some states let you take the tips deduction on your state return too; most still tax tips in full.

What the calculator assumes

It uses the 2026 federal brackets and standard deduction, the 2026 Social Security wage base of $184,500, and each state's 2026 rate schedule, standard deduction and exemptions, including the phase-outs and credits that matter at tipped-worker incomes. It assumes all your tips are reported and qualify for the deduction, and it leaves out dependents, the Earned Income Tax Credit, the child tax credit and itemized deductions. Those usually lower your tax, so treat the result as a close estimate, not a bill.

If you're paid as a contractor (1099), the estimate also takes off half of your self-employment tax and the qualified business income deduction. If you need to send money in during the year, use the quarterly tax calculator.

Common questions

Do I pay tax on cash tips?

Yes. Cash tips are taxed the same as card tips. If you're an employee, report them to your employer by the 10th of the next month when they reach $20 or more in a month, so they show up on your W-2. Unreported tips still count, and in any month you got $20 or more from one job you'd owe Social Security and Medicare on them through Form 4137.

Why is my withholding so high if I might owe nothing?

Your employer's withholding doesn't account for the deduction unless you claim it on your Form W-4. If the deduction drops your tax, you get the difference back as a refund. If you'd rather have the money each paycheck, the 2026 W-4 has a qualified tips line in its Step 4(b) Deductions Worksheet.

Does the No Tax on Tips deduction lower my state tax?

Only in some states. States that start from federal taxable income usually carry it over unless they opt out, and a handful of others, such as New York, Michigan and Arizona, passed their own versions. Pick your state above and the calculator applies the rule for 2026.

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