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Which OBBBA deductions does your household actually get?

Four deductions, one shared MAGI, interacting phase-outs. Enter your household once and read the whole picture off one pay statement.

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Rules verified Ruleset 2026.1P.L. 119-21 (OBBBA) § 70201 — qualified tips deduction, IRC § 224

The answer

Your 1 OBBBA deduction totals $8,000 and cuts your 2026 federal tax by $960. Every dollar of it survives the phase-out at your MAGI.

4 of 5 details — add your other deductions to see them interact

Your household4 of 5 details
Household

Before tax, excluding tips and overtime — those go below.

Everything else in MAGI: a second job, self-employment, interest, pensions.

65 or over adds the senior deduction

Tips

Qualified — Wait staff (102)

Only occupations on the IRS qualified list count. Type two letters for an instant verdict.

Overtime

Enter your rate to price a shift.
Car loan

Annotated pay statementTax year 2026
Gross income (MAGI)$38,000

Wages + tips + gross overtime + other income. The deductions below never reduce it — which is why one raise can shrink several at once.

OBBBA deductions — claimed on your 1040, even without itemising

  1. Qualified tips deduction$8,000

    worth $960 of federal tax at your 12.0% bracket

  2. Qualified overtime deduction— not entered
  3. Senior deduction (65+)— not entered
  4. Car-loan interest deduction— not entered
Total OBBBA deductions$8,000
Estimated federal tax saved$960

Exact bracket-table math, not deduction × rate. A deduction lowers taxable income; it is not a refund.

These deductions reduce federal income tax only. Tips and overtime are still subject to Social Security and Medicare (FICA) tax, and may be taxed by your state. “No tax on tips” does not mean tax-free tips.

    Phase-out meter — tips and overtime, single threshold $150,000

    Your MAGI of $38,000 is $112,000 below the $150,000 threshold. Both deductions apply in full.

    Household MAGI against the tips and overtime phase-out
    Your MAGI$38,000
    Phase-out threshold$150,000
    Room before the threshold$112,000
    Fully phased out at$230,000

    What the next dollar costs

    $30,000
    $0$400,000

    Each additional $1,000 of your base wages costs you $120 a year.

    What your 2026 W-2 should show

    From tax year 2026, W-2s carry dedicated entries for qualified tips and qualified overtime, and employers face a penalty per incorrect form. Check yours against these figures.

    Expected 2026 W-2 entries for the figures you entered
    W-2 fieldShould showWhy
    Box 1 — wages$38,000Wages + tips + full overtime pay. The deduction happens on your 1040, not on the W-2, so Box 1 is never reduced.
    Box 7 — Social Security tips$8,000Your reported tips. If you reported tips to your employer and Box 7 is short, the deduction gets harder to substantiate.
    Qualified tips (2026 dedicated entry)$8,000Total qualified tips with your occupation code. On 2025 forms this lives in Box 14 or is missing entirely; the 2026 box number is pending the final IRS instructions.

    If your W-2 doesn't match. Ask your employer for a corrected W-2 (Form W-2c) before you file — employers owe a penalty per incorrect form, so most will fix it. For 2025, which had no dedicated box, reconstruct the premium from your pay stubs (hours × regular rate × 0.5) and keep the stubs as substantiation.

    Rule sets tips-2026.1+overtime-2026.1+senior-2026.1+car-loan-2026.1+brackets-2026.1+occupations-2026.1

    The paystub

    The workings

    rules verified 8 Aug 2026

    A single server earning $30,000 in wages plus $8,000 in reported tips deducts the full $8,000 and saves about $960 of federal tax at the 12% bracket. Tips and overtime deductions shrink once MAGI passes $150,000 single or $300,000 joint.

    Is overtime really tax-free now?

    No — and neither are tips. The OBBBA deductions reduce federal income tax only. Every tipped and overtime dollar still pays Social Security and Medicare (FICA), and most states still tax it. What changed is that the FLSA overtime premium — the extra half in time-and-a-half — and qualified tips up to $25,000 became deductible on your 1040, even if you don't itemise.

    Why do all four OBBBA deductions have to be computed together?

    All four deductions phase out against the same MAGI. A raise, a spouse's new job, or a run of extra shifts can shrink several at once — so near a threshold the next $1,000 of income is taxed well above your bracket. The calculator states that marginal rate explicitly, which no single-deduction tool can, because it only ever sees one phase-out.

    When do the OBBBA tips and overtime deductions expire?

    The OBBBA deductions run tax years 2025 to 2028 unless Congress extends them. If you missed the 2025 deduction because your W-2 had no box for it, you can still amend: reconstruct the overtime premium from your pay stubs (hours × regular rate × 0.5) and file Form 1040-X.

    Every formula, stated exactly as the engine runs it →

    Guides

    No guide has been published for this tool yet. The guides index lists what has.

    Terms used here

    Rules verified · P.L. 119-21 (OBBBA) · How every deduction is computed →

    This is an independent estimate engine, not tax advice and not your employer's payroll department. Every rule is cited on Sources and every formula is on Methodology. Confirm your numbers before you file. What you type stays in your browser.

    Pre-launch build: 6 rule files still carry placeholder values pending IRS primary-source verification. Figures are illustrative until they clear.