Methodology

One JavaScript engine produces every number on this site — the live calculator, the worked examples printed on each state page, and the automated tests. Here is what it does, step by step.

1. The deduction

The engine follows Schedule 1-A (Form 1040) Part II exactly. Qualified tips are capped at $25,000 per return. The threshold is $300,000 for married filing jointly and $150,000 for every other status, including qualifying surviving spouse. Excess modified AGI is divided by $1,000 and rounded down to a whole number, multiplied by $100 and subtracted. Example: $22,000 of tips and $187,400 of MAGI give an excess of $37,400, so 37 steps and a $3,700 reduction — a deduction of $18,300. Married filing separately and occupations not on Treasury’s list return zero, with the reason shown. For the self-employed, tips are first limited to the business’s net profit.

Modified AGI is modeled as your tips plus the “other income in your AGI” you enter. If you have foreign earned income excluded under section 911 or territorial income under sections 931 or 933, add it to that field.

2. Federal tax saved

Taxable income before the deduction is AGI minus the larger of the standard deduction and any itemized deductions you enter. The engine computes tax on that amount and on the amount after subtracting the tips deduction, using the IRS rate tables for the year (Rev. Proc. 2024-40 for 2025, with OBBBA’s standard deductions per Rev. Proc. 2025-32; Rev. Proc. 2025-32 for 2026), and reports the difference. That is exact for ordinary income taxed at the regular rates. It ignores credits, the alternative minimum tax, preferential capital-gain rates and the other Schedule 1-A deductions. For 2027 and 2028 the IRS had not published brackets on 2026-10-05; those years switch to an explicit mode in which you enter your own marginal rate, and the result is labeled “needs your figure.”

3. The state

Each state carries a verified status for 2025 and 2026 — no wage tax, tips taxed, federal amount allowed, or a capped state exclusion — with the citation shown on its page. Where tips are deductible, the state saving is the state deduction times a marginal rate: the flat rate for flat-tax states, or, for graduated states (Hawaii, Montana, New York, North Dakota, Oregon), the state’s published schedule applied band by band to your federal taxable income before and after the deduction. Federal taxable income stands in for state taxable income, which differs, so the result is labeled approximate and you can override the rate. For the worked example on the Oregon page the engine gives a $1,575 state saving.

4. Payroll tax

For employees the result shows 6.2% Social Security on the tips up to the year’s wage base after your other wages, plus 1.45% Medicare, because the deduction does not change either. The 0.9% Additional Medicare Tax and self-employment tax are not computed.

5. Tipped minimum wage

Every state has dated rate windows. The weekly check finds the window for the date you choose, then applies the federal rule: the employer pays at least the cash wage, and if cash wage plus tips is below the full minimum times hours, it owes the difference. States that ban tip credits require the full minimum before tips. Hawaii’s credit applies only when wages plus tips exceed the minimum by $7.00 an hour. If you pick a date after a window ends and the state has not published the next rate, the tool asks for the official figures instead of carrying the old rate forward.

6. Tests and gates

Every state and DC has a unit test whose expected value is worked out by hand from the cited source. A date-horizon test fails 45 days before any wage window ends without a published successor — it passes today. Each build also checks that every page is unique, crawlable and correctly canonical, and a browser suite runs the calculator on every state page.