How to Claim the Tips Deduction on Form 1040 / Schedule 1-A (2026)
The tips deduction goes on the new Schedule 1-A and flows to Form 1040.
Estimate your Schedule 1-A tips deduction
What the phase-out actually does
A single filer claiming the full $25,000 of qualified tips. Every row is produced by the same calculation the estimator above uses, at a 22% marginal rate.
| Modified AGI | Qualified tips | Before phase-out | Phase-out | Deduction | Tax saved |
|---|---|---|---|---|---|
| $149,999$1 below the phase-out start — still the full amount | $25,000 | $25,000 | — | $25,000 | $5,500 |
| $150,000Exactly at the phase-out start — still the full amount | $25,000 | $25,000 | — | $25,000 | $5,500 |
| $212,500Inside the phase-out range | $25,000 | $25,000 | − $6,200 | $18,800 | $4,136 |
| $275,000Inside the phase-out range | $25,000 | $25,000 | − $12,500 | $12,500 | $2,750 |
| $337,500Inside the phase-out range | $25,000 | $25,000 | − $18,700 | $6,300 | $1,386 |
| $399,999$1 before the deduction reaches zero | $25,000 | $25,000 | − $24,900 | $100 | $22 |
| $400,000The first modified AGI at which nothing is left | $25,000 | $25,000 | − $25,000 | $0 | — |
| $400,001$1 past it — there is nothing further to lose | $25,000 | $25,000 | − $25,000 | $0 | — |
The two shaded rows at the top are the ones worth noticing: the deduction is still whole at the threshold, so reaching it costs nothing. The rows at the bottom show where it finally runs out.
You claim the No Tax on Tips deduction on the new Schedule 1-A (Additional Deductions), which attaches to Form 1040. Enter your qualified tips (from W-2 Box 12 code TP, or your own records for 2025), apply the $25,000 cap and the income phase-out, and the result reduces your taxable income — whether you take the standard deduction or itemize.
The OBBBA deductions live on a brand-new form: Schedule 1-A, 'Additional Deductions.' It's where the tips, overtime, car-loan, and senior deductions are calculated before flowing to your Form 1040. These are additional deductions available to eligible taxpayers whether they itemize or claim the standard deduction.
For 2026, your qualified tips come from W-2 Box 12, code TP. For 2025, employers weren't required to break them out, so you calculate qualified tips from your own tip records.
Step by step
- Find your qualified tips: W-2 Box 12 code TP (2026) or your tip log (2025).
- Confirm your occupation is on the Treasury/IRS tipped list.
- Enter the tips on Schedule 1-A, applying the $25,000 cap.
- Apply the MAGI phase-out if your income is over $150k single / $300k MFJ.
- The allowed deduction flows to Form 1040, reducing taxable income.
What you can and can't stack
Schedule 1-A deductions are available whether you itemize or claim the standard deduction — you don't have to itemize. If you also have qualifying overtime, car-loan interest, or the senior deduction, each has its own section on Schedule 1-A with its own cap.
You can't deduct the same tips twice, and mandatory service charges never count. Keep your records: the IRS can ask you to substantiate reported tips.
Frequently asked questions
Where do I claim the tips deduction on my 1040?
On the new Schedule 1-A (Additional Deductions), which flows to Form 1040 under the applicable tax-year instructions. It is available whether you claim the standard deduction or itemize.
Where is the tips deduction reported?
It is calculated in Part II of Schedule 1-A and carried to Form 1040 under the applicable tax-year instructions. Verify the current-year form and line numbering with the IRS instructions before filing.
Do I need to itemize to claim it?
No. You claim the tips deduction whether you take the standard deduction or itemize on Schedule A.
What if my W-2 doesn't show a code TP?
For 2025, employers weren't required to report it, so calculate your qualified tips from your own records. For 2026 onward, it should appear in Box 12, code TP.
IRS sources & verification
Last reviewed August 8, 2026.