Which numbers to use for 2026
Start with the tips you reported to your employer. For a 2025 return they are in box 7 of your Form W-2 (social security tips); the IRS also lets you use the total of your monthly tip reports (Form 4070), which can be more accurate if your wages and tips passed the Social Security wage base. For 2026 the W-2 has its own line: box 12, code TP, with your occupation code (101 for bartenders, 102 for wait staff) in the new box 14b.
Cash tips you didn’t report to your employer go on Form 4137, which also adds the Social Security and Medicare tax on them. Put them in the second field: they count toward the deduction once they are on that form.
What gets taken out
The calculator opens with $1,200 of automatic gratuities inside the W-2 figure, the kind a restaurant adds to large parties. Those aren’t tips under the law, because the customer didn’t decide the amount, so they come off before the cap. If guests are expressly told they can remove or change the charge without any consequence, it can count as a tip.
Two IRS examples matter for bars. A bartender serving alcohol without a license that state law requires is committing a misdemeanor, so those tips don’t qualify. A server at a restaurant that lacks a liquor license is different: serving tables is legal, so the server’s tips still count.
What a server’s deduction usually looks like
Most restaurant workers are far below the $150,000 MAGI where the phase-out starts, so the deduction is simply your qualified tips up to $25,000. The saving depends on your bracket: in the 12% bracket, $20,000 of qualified tips saves about $2,400 of federal income tax. If your taxable income is already low, part of the deduction may land below zero and save nothing; the calculator shows that too.
Couples who both work in restaurants share one $25,000 cap on a joint return, so add both of your tips into the fields.
Beverage and food service: the Treasury’s tipped occupations
| Code | Occupation | Includes, for example |
|---|---|---|
| 101 | Bartenders | Barkeep, mixologist, taproom attendant, sommelier |
| 102 | Wait staff | Cocktail waitress, dining car server, banquet staff |
| 103 | Food or beverage servers, non-restaurant | Room service food server, boat hop, beer cart server |
| 104 | Dining room and cafeteria attendants and bartender helpers | Bar back, bar helper, busser |
| 105 | Chefs and cooks | Executive chef, pastry chef, sous chef, fast food cook, private chef, restaurant cook, saucier, food truck cook, banquet cook, caterer, chocolatier, confectioner |
| 106 | Food preparation workers | Salad maker, sandwich maker, fruit and vegetable parer, kitchen steward |
| 107 | Fast food and counter workers | Barista, ice cream server, cafeteria server |
| 108 | Dishwashers | Dish room worker, silverware cleaner |
| 109 | Host staff, restaurant, lounge, and coffee shop | Maître d’hôtel, dining room host |
| 110 | Bakers | Bread baker, cake baker, bagel baker, pastry finisher |
From the IRS list of occupations that customarily and regularly received tips on or before December 31, 2024, checked October 18, 2026. The calculator’s occupation menu has the full list.