--- title: "Do I Still Pay Social Security and Medicare on Tips?" description: "Yes, generally. “No Tax on Tips” is a federal income tax deduction for qualified tips. It doesn’t waive Social Security and Medicare (FICA)." url: https://www.tipmaxapp.com/us/answers/do-i-still-pay-social-security-medicare-on-tips language: en publisher: TipMax (Entermaurs Incorporated) date_published: 2026-09-23 last_verified: 2026-09-23 --- # Do I still pay Social Security and Medicare on tips if there’s No Tax on Tips? **Short answer:** **Yes, in general, you still pay Social Security and Medicare (FICA) on tips.** “No Tax on Tips” is about a **federal income tax deduction** for qualified tips, not a waiver of payroll taxes. The IRS still treats tips as income subject to federal income tax rules **and** generally to Social Security and Medicare when tips are reported as required. Keep reporting tips to your employer; the new deduction is claimed when you **file**, on Schedule 1-A. ## Example math You report **$10,000** in tips. 1. **FICA (employee share, simplified):** **6.2%** Social Security + **1.45%** Medicare = **about 7.65%** of applicable tips and wages, or about **$765**. The **2026 Social Security wage base is $184,500**, and the **0.9%** Additional Medicare Tax may apply at higher incomes. 2. **Federal income tax side:** If those tips are qualified and deductible, illustrative savings at a **22%** marginal rate ≈ $10,000 × 0.22 = **$2,200** (illustrative rate; enter your own marginal rate). 3. The net story for many workers: income-tax relief **can** outweigh the FICA line in a napkin comparison, but **FICA did not go to zero**, and state tax may still apply. **Not tax advice.** ## Plain English ### Two different tax systems - **Payroll taxes (FICA):** Social Security and Medicare on wages and tips, generally withheld and paid through your job when tips are reported. - **Federal income tax:** Your annual return. The qualified tips deduction reduces income tax via **Schedule 1-A**, Part II (“No Tax on Tips”). Marketing said “no tax on tips.” The law, as the IRS implements it, is a **deduction with caps, phase-outs, and eligibility rules**, not “FICA off.” ### What you should still do every month - Keep a daily tip record. - Report cash tips to your employer when required (generally if **$20+** in a month from that employer). - Expect tips on your W-2. For **2026**, watch for box 12 code **TP** and the Treasury Tipped Occupation Code in box **14b**. **2025** used transition relief under Notice 2025-69 (W-2 unchanged that year). See [W-2 box 12 code TP explained](https://www.tipmaxapp.com/us/answers/w2-box-12-code-tp-explained). ## Common mistakes - Skipping tip reports because “tips aren’t taxed now.” - Comparing a friend’s refund without asking whether they paid FICA all year. - Ignoring Additional Medicare Tax if your wages plus tips are very high. ## Official sources - [IRS: Tip recordkeeping and reporting](https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting) - [IRS newsroom: Schedule 1-A published (IR-2026-28)](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors) - [Schedule 1-A (Form 1040)](https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf) - [IRS: Topic 560, Additional Medicare Tax](https://www.irs.gov/taxtopics/tc560) - [IRS: Topic 751, Social Security and Medicare withholding rates](https://www.irs.gov/taxtopics/tc751) ## Last verified September 23, 2026. Sources checked: IRS tip recordkeeping page, IRS Topic 751, Publication 15, IRS Topic 560, and Schedule 1-A. Confirmed: FICA generally still applies to tips; employee rates of 6.2% Social Security and 1.45% Medicare; the $20-a-month tip-reporting rule; W-2 code TP and box 14b for 2026. **Still open:** How the Social Security wage base and Additional Medicare Tax play out for you depends on your own wages, tips, and filing status. ## Related - [How does No Tax on Tips work for 2026?](https://www.tipmaxapp.com/us/answers/how-no-tax-on-tips-works-2026) - [Do I have to report tips to claim the deduction?](https://www.tipmaxapp.com/us/answers/do-i-have-to-report-tips-to-claim-deduction) - [How do I claim on Schedule 1-A?](https://www.tipmaxapp.com/us/answers/how-to-claim-schedule-1a) - [Qualified tips vs service charges](https://www.tipmaxapp.com/us/answers/qualified-tips-vs-service-charges) ## How TipMax helps with this Reported tips still carry payroll tax, so your records should match what you reported. TipMax is an iPhone app for servers and bartenders that tracks tips and tip-outs and turns a restaurant menu into study flashcards. - Log cash and card tips per shift in seconds. - Weekly, monthly, and pay-period totals. Download TipMax free: https://apps.apple.com/us/app/tipmax-study-track-earn/id6744850146 --- TipMax Answers explains public IRS guidance in plain English for tipped workers. It is **not tax, legal, or accounting advice**. Rules can change. Confirm figures on IRS.gov and with a qualified tax professional before you file. TipMax the app helps you track tips and true hourly pay; it does not file your taxes.