Tips Tax Calculator 2026
Calculate your federal tax savings on tip income. The 2026 exemption covers up to $25,000 in tips per year.
Under the No Tax on Tips law (2025), workers in tipped occupations can exclude up to $25,000 of tip income from federal income tax in 2026. A server earning $25,000 in tips saves roughly $2,500–$5,500 in federal taxes depending on filing status. FICA taxes (7.65%) still apply to all tip income.
- Up to $25,000 in annual tip income is exempt from federal income tax in 2026
- The exemption applies to workers earning $160,000 or less in wages
- FICA taxes (Social Security + Medicare = 7.65%) still apply to all tips
- Tips must still be reported — the exemption removes income tax, not reporting
- Most states still tax tip income — check your state rules separately
Calculate Your Tip Tax Savings
Calculations run in your browser — no data sent anywhere
Note: State Taxes Not Included
This calculator covers federal income tax only. Most states still tax tip income at the state level. Workers in Texas, Florida, Nevada, and other no-income-tax states save even more overall. See IRS.gov for official guidance.
Tips Tax 2026 — FAQ
How much tip income is tax-free in 2026?
Up to $25,000 in annual tip income is exempt from federal income tax under the No Tax on Tips law signed in 2025. Tips above $25,000 are taxed normally.
Does No Tax on Tips also remove FICA?
No. Social Security (6.2%) and Medicare (1.45%) still apply to all tip income, including exempt tips. Only federal income tax is waived on the first $25,000.
Who qualifies for the tips tax exemption?
Workers in traditionally tipped jobs qualify: servers, bartenders, hotel staff, hair stylists, valets, and similar roles. Your total wages must be $160,000 or less.
Do I still report tips on my tax return?
Yes. All tips must still be reported to your employer and on your federal return. The exemption means the first $25,000 is not subject to income tax — but it is still reported income.
Does the $25,000 cap reset each year?
Yes. The $25,000 exemption applies per tax year. If you earn $30,000 in tips in 2026, $25,000 is exempt and $5,000 is taxable.
What states also exempt tip income from state tax?
Most states still tax tip income at the state level. A few states with no income tax — like Florida, Texas, and Nevada — effectively exempt tips. Check your state rules separately.
Helped 5,000+ freelancers navigate IRS rules. Specializes in payroll and W-2 income taxation.
Disclosure: This site may contain affiliate links. If you click and purchase, we may earn a small commission at no extra cost to you. We only recommend tools we trust. This is not financial advice — consult a licensed professional for your situation.