Indiana tips deduction calculator — 2026 only

Indiana created a state tips deduction for exactly one year: tax year 2026. Information Bulletin #128 says it starts from the federal amount on Schedule 1-A line 13, including the income phase-out.

Your Indiana tips

State where you work Qualified tips this year

Voluntary cash and card tips on your W-2, 1099 or Form 4137 — not service charges.

Tax year

2025202620272028

Filing status Other income in your AGI

Wages without the tips, plus any other income (both spouses if filing jointly).

Your occupation The 71 Treasury Tipped Occupation Codes in the final rule (TD 10044).

How you are paid

Employee (W-2) Self-employed (1099)

More options

Itemized deductions (if larger than the standard deduction)

State marginal rate override (%) Leave blank to use the state’s published rate for your bracket.

Federal income tax saved in 2026Deduction $18,000 at 12% $2,160

$18,000 of the $25,000 cap used (72%)

Qualified tips	$18,000
After the $25,000 cap	$18,000
Income phase-out (MAGI $48,000)	$0
Tips deduction	$18,000
Federal tax before → after	$3,580 → $1,420
Social Security & Medicare still due on tips	$1,377
Indiana 2026: State allows the federal tips amount ($18,000 × 2.95%)	$531
Total income tax saved	$2,691

What the estimate leaves out

How IC 6-3-2-31 works

The 2026 General Assembly added three one-year deductions: tips (IC 6-3-2-31), overtime (6-3-2-32) and passenger-vehicle loan interest (6-3-2-33). The Department of Revenue’s June 2026 bulletin explains that the Indiana tips deduction cannot exceed what you deducted federally, so married couples filing separately — who get no federal deduction — get none in Indiana either. Nothing is available for 2025, and the deduction expires after 2026 unless extended.

Indiana’s rate is 2.95% for 2026 and falls to 2.90% in 2027. County income taxes are computed on Indiana adjusted gross income, so the deduction also trims county tax, which this calculator does not estimate.

Indiana figures

Cash wage / minimum	$2.13 / $7.25
In force	July 1, 2026
Next change	none scheduled
Tipped threshold	More than $30 a month in tips
Tips on the 2025 return	tips stay taxable in this state. Indiana’s deduction was created in 2026 and applies only to the 2026 tax year. Source: Indiana Department of Revenue
Tips on the 2026 return	state allows the federal tips amount. IC 6-3-2-31 allows a 2026 deduction that “begins with the amount of qualified tips allowable as a deduction for federal income tax purposes, including income phaseouts.” Source: Indiana Department of Revenue

Tipped wage

Indiana uses the federal figures: a $2.13 cash wage and $5.12 tip credit for workers receiving more than $30 a month in tips.

An Indianapolis bartender in 2026

The federal deduction of $19,000 saves $2,280; the matching Indiana deduction saves about $561 at 2.95%. A 32-hour week at $2.13 plus $150 of tips leaves $14 of make-up pay owed.

Check an Indiana workweek

Employer make-up owed$2.13 cash wage + tips must reach $7.25 an hour. $14

Minimum for the hours	$232
Cash wage paid	$68
Tips counted toward the minimum	$150
Your effective hourly pay	$7.25

How the make-up rule works

Where these figures come from

Federal rules: how the deduction works. Nearby: Michigan, Ohio, Kentucky, Illinois.

Figures verified against primary sources on October 5, 2026