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The 2026 tips deduction, in plain terms

OBBBA's tips deduction lets qualifying workers deduct reported tip income within an annual cap and income phase-outs — it's a deduction at filing, not a payroll exemption.

Only voluntary tips in traditionally-tipped occupations qualify; service charges the employer distributes are wages, not tips, and don't count.

If you also work overtime, the tips and overtime deductions stack — model them together to see your combined effect.

Try it: TaxBreakCalc on tips deduction plain terms.