The worker in the calculator
The page opens with a single filer paid every two weeks, $1,800 of taxable pay per paycheck including reported tips and overtime: $46,800 for a full year. Of that, $9,000 is qualified tips and $4,000 the qualified half of time-and-a-half overtime. Both are under their caps and the income is far below $150,000, so $13,000 comes off taxable income on the 2026 return.
With a W-4 that only gives the filing status, the employer doesn’t know that. Over a full year the 2026 tables withhold about $3,436, the tax on $46,800 without the new deductions. With them, the tax is about $1,876: $13,000 less taxable income at the 12% rate is $1,560 less tax. Putting $13,000 in Step 4(b) brings the withholding down to match, about $60 more in each paycheck.
How to fill it in
- Estimate your qualified tips for the year. Count tips your employer reports on your pay stub and cash tips you report to them; leave out automatic service charges, which aren’t tips.
- Estimate the “and-a-half” part of your overtime: overtime hours × regular rate × 0.5.
- Enter both in the calculator, with your stub’s year-to-date pay and federal withholding. The suggested Step 4(b) adds them, plus any other deductions you entered, and the Step 3 amount spreads what was over-withheld earlier this year over the paychecks left.
Tips can swing from month to month. If you aren’t sure, enter a lower estimate: under-counting the deduction means a little more withheld and a refund, not a bill.
Who qualifies
The tips deduction needs tips in an occupation on the Treasury’s list of jobs that customarily received tips before 2025; the overtime one needs overtime the FLSA requires, so salaried exempt staff and overtime paid only by a contract or state law above the FLSA don’t count. Both need a Social Security number valid for work and, if married, a joint return. The no tax on tips calculator and the no tax on overtime calculator go through the rules one by one. Both deductions run for tax years 2025 through 2028; a W-4 for 2027 should repeat this with that year’s estimates.