I’m a server — how does No Tax on Tips affect me?
The short answer
Example math
Your annual reported tip income that you retain after tip-outs is $22,000. You’re single, and your MAGI is under the phase-out. Your illustrative federal marginal rate is 22% (illustrative only; enter your own marginal rate).
- Your occupation is on the list (for example, TTOC 102), so the eligibility gate is open if the other rules are met.
- Deduction = min($22,000, $25,000) = $22,000 (no phase-out).
- Illustrative federal income-tax savings ≈ $22,000 × 0.22 = $4,840.
- Separately, employee FICA still generally applies: about 7.65% on applicable tips and wages, with wage base limits.
Not tax advice. Confirm your TTOC on the live IRS table and on your W-2 (for 2026: box 12 code TP and box 14b).
Check your estimate
Subtract estimated auto-grat and other non-qualified amounts before you celebrate the savings number.
Open the calculator
Plain English
Server-specific traps
- Large-party auto-grat and banquet “grat” are usually not qualified tips. See Does an auto-gratuity count as a tip?
- Tip-outs to bussers and the bar: you generally claim what you retain, and they claim what they receive. See Tip-outs and qualified tips. Follow your house’s written tip policy; the IRS hasn’t published pool-allocation formulas for every setup.
- Dual jobs (server plus host): only tips in listed occupations count, and your W-2 may show up to two TTOCs in box 14b.
Common mistakes
- Dumping all banquet “grat” into the deduction.
- Skipping tip reports because “tips aren’t taxed now.”
- Ignoring the occupation list because “everyone here gets tipped.”
Official sources
Last verified:
Sources checked: IRS tipped occupations list, IRS tip recordkeeping page, and Schedule 1-A. Confirmed: wait staff are Treasury Tipped Occupation Code 102, plus the $25,000 cap, MAGI phase-out, FICA still applying, and service charges not counting as tips.
Still open: House-specific tip-out formulas.