Tax year 2026 · Free estimate
No Tax on Tips & Overtime Calculator (2026)
Estimate the four new federal deductions from the 2025 tax law (tips, overtime, car loan interest and seniors) and what they save you.
Roughly your adjusted gross income; include tips and overtime.
Voluntary cash or card tips, including shared tips, in an occupation on the IRS tipped-occupations list.
Estimated federal tax savings
$960
about $80/month
| Deduction | Your amount | Cap | Phase-out applied | Deduction |
|---|---|---|---|---|
| Tips | $0 | $25,000 | None | $0 |
| Overtime | $0 | $12,500 | None | $0 |
| Car loan interest | $0 | $10,000 | None | $0 |
| Senior | $0 | $6,000 each | None | $0 |
| Total new deductions | — | — | — | $0 |
- Taxable income before After the $16,100 standard deduction
- $28,900
- Taxable income after
- $28,900
- Federal income tax before
- $3,220
- Federal income tax after
- $3,220
What this means
Ignores the older additional standard deduction for people 65+ and any other credits or deductions. Brackets and amounts are 2026 figures.
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Tax years 2025 to 2028
Four new deductions, each with a cap and an income phase-out.
Claimed on the new Schedule 1-A, whether or not you itemize.
| Deduction | Cap | Phase-out starts (MAGI) | Reduction |
|---|---|---|---|
| Tips Qualified tips | $25,000 | $150,000 Single $300,000 married filing jointly | $100 per full $1,000 over |
| Overtime Premium portion only | $12,500 $25,000 married filing jointly | $150,000 Single $300,000 married filing jointly | $100 per full $1,000 over |
| Car loan interest New, US-assembled vehicle | $10,000 | $100,000 Single $200,000 married filing jointly | $200 per full $1,000 over |
| Senior Age 65+ | $6,000 Per qualifying person | $75,000 Single $150,000 married filing jointly | 6% of MAGI over |
These deductions lower federal income tax only. They don't reduce Social Security and Medicare (FICA) tax or most state income taxes. You need a valid SSN, and married couples must file jointly.
Who qualifies for each deduction.
Tips
- Your occupation customarily received tips on or before Dec 31, 2024
- It's on the IRS list of tipped occupations
- Tips are voluntary cash or card tips, including shared tips
- Not earned in a specified service trade or business
Overtime
- Overtime required by the Fair Labor Standards Act (FLSA)
- Only the premium portion counts: the "half" in time-and-a-half
- Reported on your W-2 or 1099
Car loan interest
- Loan originated after Dec 31, 2024
- New vehicle for personal use, under 14,000 lbs
- Final assembly in the US. Check the VIN with NHTSA's decoder at vpic.nhtsa.dot.gov/decoder
Seniors
- Age 65 or older by the last day of the tax year
- $6,000 each; both spouses can qualify on a joint return
Two worked examples.
Calculated with the same 2026 rules as the tool above.
Server, single
Saves $960
- Income $45,000, tips $8,000
- Tips deduction $8,000
- Federal tax $3,220 → $2,260
Married couple, filing jointly
Saves $1,440
- Income $120,000, overtime premium $9,000, car loan interest $3,000 on an eligible loan
- Total deductions $12,000
- Federal tax $10,040 → $8,600
Common questions.
Is tip income tax-free now?
No. Qualified tips can be deducted up to $25,000 a year from federal taxable income, reduced at higher incomes. Tips are still reported as income and still subject to Social Security and Medicare (FICA) tax.
Does all my overtime count?
No. Only the premium counts: the extra half in time-and-a-half pay required by the FLSA. Your regular rate for those hours is taxed as usual.
Do I need to itemize?
No. These deductions go on the new Schedule 1-A and work whether you take the standard deduction or itemize.
Does it apply to 2025 returns?
Yes. The deductions apply to tax years 2025 through 2028.
Does my state follow it?
It varies by state. These are federal deductions; check with your state tax agency.
Is this calculator affiliated with the IRS?
No. It's an independent educational estimate. The IRS warns about fake deduction calculators used in scams; this page never asks for personal information and offers nothing to buy or claim.
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