PaycheckZip.com

No tax on tips

Tips you enter are taxed on the paycheck. The deduction, up to $25,000, is an estimate for the tax return and does not reduce FICA.

Tax year 2026 Tables verified 2026-10-09
Overtime, tips, and bonus
W-4, benefits, local tax, and year-to-date

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Every two weeks

Net pay $1,067.33

Effective tax rate 12.80% of gross. About $2,312.56 a month over a full year.

  • Net pay $1,067.33
  • Federal income tax $63.03
  • FICA $93.64
This paycheck
$1,067.33
Full year, net
$27,750.68
Full year, gross
$31,824.00
Hourly equivalent
$16.00
  • The overtime and tips deduction is claimed on the tax return. It does not lower Social Security, Medicare, or withholding on this paycheck.
How we calculated this
Gross pay$1,224.00
  1. This paycheck $1,224.00

Amount entered. Hourly rate times hours, plus overtime, tips, and any bonus on this check.

Federal income tax$63.03
  1. 1a Taxable wages this period $1,224.00
  2. 1b Pay periods in the year 26
  3. 1c Annualized wages (1a × 1b) $31,824.00
  4. 1d Step 4(a) other income $0.00
  5. 1e 1c + 1d $31,824.00
  6. 1f Step 4(b) deductions $0.00
  7. 1g $8,600.00 (any other filing status)
  8. 1i Adjusted annual wages $23,224.00
  9. Table Single or married filing separately, standard (Pub 15-T 2026)
  10. Bracket $19,900.00 up to $57,900.00: $1,240.00 plus 12% of the amount over $19,900.00
  11. 2g Tentative annual tax $1,638.88
  12. 2h Per paycheck (2g ÷ periods) $63.03
  13. 3 Step 3 credits, per paycheck $0.00
  14. 4c Extra withholding $0.00
  15. Federal income tax this paycheck $63.03

IRS Publication 15-T (2026), Worksheet 1A. Percentage method for automated payroll systems.

Social Security$75.89
  1. Rate 6.2% × $1,224.00 of Social Security wages, wage base $184,500.
  2. This paycheck $75.89

Social Security Administration, contribution and benefit base. 6.2% up to the 2026 wage base of $184,500. The annual maximum is $11,439.

Medicare$17.75
  1. This paycheck $17.75

IRS Publication 15 (2026). 1.45% of Medicare wages. No wage base.

Texas income tax$0.00
  1. State income tax $0.00. No wage income tax.

Texas Comptroller of Public Accounts. Texas does not tax wage income.

Net pay$1,067.33

Withholding and the deduction

Enter the tips on a typical paycheck. The year summary multiplies that amount by the number of pay periods, then caps the deduction at $25,000. A paycheck that only sometimes includes tips should use a lower per-period amount.

Questions

What is the tips cap?

$25,000. It is not doubled for married filing jointly.

Do tips still pay Social Security?

Yes. Reported tips are wages for Social Security and Medicare, up to the usual limits.

Does the overtime cap also apply to tips?

They are separate caps. The income phase-out can reduce both. This estimate reduces overtime first, then tips.

Is this a tip-out calculator for a restaurant shift?

No. It estimates tax on tips you already know, per paycheck. It does not split a bill.

Related

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Who is responsible

Published by PaycheckZip.com. A credentialed reviewer has not signed this page. The review seat is open. Figures are estimates from the tables named in the method, checked 2026-10-09. They are not tax advice.

Case amounts on the public list, such as $216.15 of federal income tax on the single biweekly example, come from the same code as this page.