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NEW 2025 LAW — Up to $25,000 in tips are now federal tax-free

California Tip Tax
Calculator 2026

In California, the No Tax on Tips law removes federal tax on up to $25,000 of tips. You also save on 9.3% state income tax. The state minimum wage is $16.9/hr in 2026.

No Tax on Tips Law Federal + State 2026 Rules 100% Private
Max Tip Deduction
$25,000
Effective From
Jan 1, 2025
Income Phase-Out
$150,000
Your State Tax
9.3%
TIP TAX CALCULATOR
2026 NO TAX ON TIPS LAW
Tax Deduction Applied
$15,000
YOUR SAVINGS
CALIFORNIA · 2026
Tips Earned$15,000
Tax-Free Deduction$15,000
Taxable Tips Remaining$0
Federal Tax Saved+$2,585
California State Tax Saved+$1,395
FICA (still owed on tips)-$1,148
Total Tax Saved+$3,980

No Tax on Tips in California — 2026 Guide

The No Tax on Tips law, effective January 1, 2025, allows tipped workers to deduct up to $25,000 in tip income from their federal taxable income. This applies to workers in traditional tipping industries — restaurants, hotels, salons, and more.

In California, the federal deduction reduces your 9.3% state tax burden too — since many state tax calculations start from federal adjusted gross income.

California is one of 7 states that ban the tip credit entirely (with Alaska, Minnesota, Montana, Nevada, Oregon, and Washington). Employers must pay the full state minimum wage of $16.9/hr in cash before tips — tips cannot offset base pay.

Compare tip taxes across all 50 states →

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