Estimates only, not tax advice. State rules last checked November 2026.
About this US tips and overtime calculator
Starting with the 2025 tax year, US federal law lets many American workers deduct their tips and overtime from their taxable income. The deductions run through 2028 and are claimed on the new IRS Schedule 1-A. This calculator shows how much you can deduct, about how much US federal tax that saves, and how your state handles the same income.
The tips deduction is worth up to $25,000 a year. It covers voluntary tips from customers, whether paid in cash, by card or through an app, as long as they are reported on your W-2, a 1099 or Form 4137. Automatic service charges don't count. The overtime deduction is worth up to $12,500, or $25,000 on a joint return. It covers only the extra half of time-and-a-half, not your full overtime pay, and only overtime that the US Fair Labor Standards Act requires your employer to pay. Both deductions shrink once your income goes above $150,000 ($300,000 for joint filers). Married couples have to file jointly to claim them.
These deductions lower your federal income tax only. Social Security and Medicare are still taken out of every dollar.
Your state may not follow the federal rules. Across the United States, nine states have no income tax at all. A few follow both deductions, some follow only one or have their own smaller limits, and most still tax tips and overtime on the state return. Pick your state in the calculator above to see where you stand in all 50 states plus Washington, DC. All numbers are estimates for tax year 2026, so check with a tax preparer before you file.
Frequently asked questions
What is the no tax on tips deduction?
It is a US federal tax deduction that lets workers in tipped jobs deduct up to $25,000 of qualified tips per year from their taxable income. It applies to tax years 2025 through 2028 and is claimed on IRS Schedule 1-A with Form 1040. Qualified tips are voluntary tips paid in cash, by card or through an app and reported on a W-2, 1099 or Form 4137.
What is the no tax on overtime deduction?
It is a US federal tax deduction for the overtime premium, meaning the extra half of time-and-a-half pay that the Fair Labor Standards Act requires. You can deduct up to $12,500 per year, or $25,000 if married filing jointly. Your regular hourly rate for overtime hours does not count, only the extra half.
How do I work out my qualified overtime if I only know my total overtime pay?
If you are paid time-and-a-half, one third of your total overtime pay is the premium. For example, $9,000 of overtime pay at time-and-a-half includes $3,000 of premium, and that $3,000 is what you can deduct. The calculator does this for you when you choose "I know my total overtime pay."
Is there an income limit?
Yes. Both deductions shrink by $100 for every $1,000 of modified adjusted gross income above $150,000, or $300,000 for married couples filing jointly. At high enough income the deduction goes to zero.
Do I still pay Social Security and Medicare on tips and overtime?
Yes. The deductions only lower federal income tax. Social Security and Medicare taxes are still withheld from all of your tips and overtime pay.
Can I claim the deductions if I am married filing separately?
No. Married couples must file a joint return to claim either the tips or the overtime deduction.
Do automatic gratuities or service charges count as tips?
No. Mandatory service charges, such as an automatic gratuity added to a large party bill, are not qualified tips. Only tips the customer chooses to give count.
Which US states have no state income tax on tips and overtime?
Nine states have no state income tax on wages, so tips and overtime are already free of state tax there: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
Which states follow both federal deductions in 2026?
For tax year 2026, Arizona, Idaho, Iowa, Michigan, Montana, North Dakota and Oregon allow both the tips and overtime deductions on the state return. Indiana allows both for tax year 2026 only. Michigan allows them for 2026 through 2028.
Which states only partly follow the deductions?
Colorado and Hawaii allow the tips deduction but tax overtime. New York exempts up to $25,000 of tips for 2026 but taxes overtime. Georgia has its own exclusions of up to $1,750 for tips and $1,750 for overtime. Alabama taxes tips but has its own overtime deduction capped at $1,000. Washington, DC passed both deductions for 2026, but the law was still under congressional review in November 2026.
Which states still tax tips and overtime in 2026?
These states tax both tips and overtime on the state return even when they are deductible federally: Arkansas, California, Connecticut, Delaware, Illinois, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Virginia, West Virginia and Wisconsin.
How accurate is this calculator?
It uses the 2026 federal tax brackets, the 2026 standard deduction and the official deduction limits to estimate your savings. It does not include credits, itemized deductions or other income adjustments, so your real tax result can differ. State rules change often and were last checked in November 2026. Check with a tax preparer or your state Department of Revenue before you file.