---
title: "No Tax on Tips for Restaurant Servers"
description: "Servers (IRS occupation code 102) can deduct reported, voluntary cash and card tips up to $25,000. Banquet auto-grat is usually a service charge."
url: https://www.tipmaxapp.com/us/answers/no-tax-on-tips-for-servers
language: en
publisher: TipMax (Entermaurs Incorporated)
date_published: 2026-09-23
last_verified: 2026-09-23
---

# I’m a server — how does No Tax on Tips affect me?

**Short answer:** If you’re restaurant **wait staff** (Treasury Tipped Occupation Code **102** on the IRS list), voluntary cash and card tips you report can be **qualified tips** for the federal deduction, up to **$25,000** with a MAGI phase-out, claimed on **Schedule 1-A Part II**. Banquet **auto-grat** is usually a **service charge**, not a tip. Tip-outs you keep versus pass on matter. You still generally pay **Social Security and Medicare** on reported tips, and your state may still tax tips.

## 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).

1. Your occupation is on the list (for example, TTOC **102**), so the eligibility gate is open if the other rules are met.
2. Deduction = min($22,000, $25,000) = **$22,000** (no phase-out).
3. Illustrative federal income-tax savings ≈ $22,000 × 0.22 = **$4,840**.
4. 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**).

## 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?](https://www.tipmaxapp.com/us/answers/qualified-tips-vs-service-charges)
- **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](https://www.tipmaxapp.com/us/answers/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

- [IRS: Occupations that customarily and regularly received tips (wait staff, 102)](https://www.irs.gov/TippedOccupations)
- [IRS: Tip recordkeeping and reporting](https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting)
- [Schedule 1-A (Form 1040)](https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf)

## Last verified

September 23, 2026. 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.

## Related

- [Tip-outs and qualified tips](https://www.tipmaxapp.com/us/answers/tip-outs-and-qualified-tips)
- [Qualified tips vs service charges](https://www.tipmaxapp.com/us/answers/qualified-tips-vs-service-charges)
- [No Tax on Tips for bartenders](https://www.tipmaxapp.com/us/answers/no-tax-on-tips-for-bartenders)
- [How No Tax on Tips works for 2026](https://www.tipmaxapp.com/us/answers/how-no-tax-on-tips-works-2026)
- [Server tip-out math: what you keep and report](https://www.tipmaxapp.com/us/answers/server-tip-out-math)

## How TipMax helps with this

Servers juggle cash, card, and tip-outs every shift.

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.
- Record tip-outs every shift, with tip-out rules for each job.
- See your true hourly rate: wage plus tips.

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. The IRS occupations list controls, not TipMax.