$
Cash and card tips you report
$
Your wages before tips, from every job
More options· Single
Tax you save on your tips
$1,730
A $15,000 deduction from your taxable income
- Federal income tax saved
- $1,730
- California tax saved
- $0
California still taxes your tips: the deduction is federal only.
What this means
This is a deduction, not a credit: it takes $15,000 off the income you’re taxed on, so it saves tax at your top rate, about 12% federally. That’s why it saves you less than the tips themselves.
Keep a record of your tips: you’ll need it to claim the deduction on your return.
Your tax with and without the deduction
| Without | With | |
|---|---|---|
| Taxable income | $23,900 | $8,900 |
| Federal income tax | $2,620 | $890 |
| California income tax | $548 | $548 |
| Income tax | $3,168 | $1,438 |
Federal income tax is after credits; a negative figure is money paid to you, such as the earned income credit.
What still applies to your tips
- Social Security and Medicare: about $1,148 on your tips. The deduction is for income tax only.
- California income tax: California doesn’t allow the deduction, so your tips are taxed as usual.
- Which tips count: tips customers choose to give, in a job on the IRS list of tipped occupations, including tips shared through a tip pool (but not by managers). Automatic service charges don’t count.
Assumptions in this estimate
- The deduction is for 2026, one of the years 2025 to 2028. It's up to $25,000 a year per return, reduced by $100 for every $1,000 of income over $150,000 ($300,000 for joint returns).
- You can claim it whether or not you itemize, and you need a Social Security number valid for work. Married people must file jointly.
- Assumes your tips and other pay are wages from employers, with the standard deduction. Self-employed tip earners can deduct tips only up to their business profit.