A deduction is not tax-free pay
The law allows qualifying amounts to reduce taxable income. It does not refund every dollar of tips or overtime, and the savings are not generally equal to the deduction itself.
This calculator compares ordinary federal income tax before and after the deductions instead of multiplying the deduction by one marginal rate. That matters when a deduction crosses a tax bracket.
The caps apply separately
Qualified tips are capped at $25,000 per return. Qualified overtime is capped at $12,500 for a non-joint return and $25,000 for a joint return.
Each capped amount is then reduced by its own MAGI phase-out. The combined calculator adds only the two allowed amounts.
MAGI can reduce both deductions
For a joint return, the phase-out begins above $300,000 of modified adjusted gross income. For other eligible filing statuses, it begins above $150,000.
Schedule 1-A reduces each capped deduction by $100 for every complete $1,000 over the applicable threshold.
FICA and state tax are separate
Social Security and Medicare taxes still apply to covered tips and overtime. This calculator does not reduce FICA.
State tax treatment depends on state law. A federal deduction does not automatically produce the same state income tax result.
Temporary relief through 2028
Public Law 119-21 applies the deductions to tax years beginning after December 31, 2024, and ends them for tax years beginning after December 31, 2028.
The estimate is fixed to 2026 federal brackets and standard deductions. Do not use it for another tax year.