Tip Tax Calculator
Reported tips are wages for tax purposes. Your employer withholds income tax and FICA on tips once they total $20 or more a month. This calculator itemizes the layers — including the new 2026 federal deduction that removes up to $25,000 of tip income from federal tax.
Quick answer: On $10,000 of tips, FICA takes $765, and after the 2026 deduction the federal income tax can be near zero for moderate incomes — versus $1,000–$2,200 before the deduction. State tax, where applicable, still uses your ordinary rate.
Cash + card tips you report to your employer
12–15% is typical for moderate tip incomes
| Tips | $15,000.00 |
| Federal income tax without deduction (15% effective) | − $2,250.00 |
| Federal income tax with 2026 deduction | − $0.00 |
| FICA (7.65%)still applies to every tip dollar | − $1,147.50 |
| State tax (custom 5%) | − $750.00 |
Estimate for tax years 2026–2028. The deduction covers tips customarily received in qualifying occupations, caps at $25,000.00 per year and phases out above $150K MAGI ($300K joint). Effective-rate input approximates your bracket math; your return decides the real number. Not tax advice.
| FICA on tips | 7.65%, withheld by your employer on reported tips |
|---|---|
| Federal income tax | Ordinary rates, minus the 2026 deduction (up to $25,000 of tips) |
| Reporting rule | Tips under $20/month still taxable; report all tips for the deduction to apply |
Common uses
- Annualize your tips and see the real tax burden
- Check whether unreported cash tips create year-end surprises (they do — report them)
- Compare two job offers with different tip potential