North Carolina tips tax calculator: taxed on the D-400

The North Carolina Department of Revenue says the new federal deductions, including tips, “cannot be deducted” on 2025 North Carolina returns because they come after AGI — and the 2025–2026 bills to change that were not enacted.

Your North Carolina 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
North Carolina 2026: Tips stay taxable in this state	$0
Total income tax saved	$2,160

What the estimate leaves out

Two bills, no law

Senate Bill 983 (“TIPs Tax Deduction”) and House Bill 11 (“No Tax on Tips, Overtime, Bonus Pay”) were filed in the 2025–2026 session. We found no enacted North Carolina deduction, so tips remain in North Carolina income for 2026 as well. For withholding, NCDOR treats tips reported to the employer as supplemental wages.

North Carolina figures

Cash wage / minimum	$2.13 / $7.25
In force	July 1, 2026
Next change	none scheduled
Tipped threshold	More than $20 a month in tips
Tips on the 2025 return	tips stay taxable in this state. NCDOR: the new OBBBA deductions, including tips, “are taken after a taxpayer calculates AGI” and cannot be deducted on 2025 North Carolina returns. Source: North Carolina Department of Revenue
Tips on the 2026 return	tips stay taxable in this state. S 983 (TIPs Tax Deduction) and H 11 were filed; we found no enacted North Carolina deduction. Source: North Carolina Department of Revenue

A tip credit with paperwork

North Carolina uses the federal $2.13 cash wage, but an employer may take the tip credit only if it obtains a signed certification of tips from each employee every month or pay period and tells employees in advance how much credit it will take. A worker counts as tipped above $20 a month in tips.

An Asheville server

The federal deduction ($16,000) saves $1,830; North Carolina taxes the tips. In 30 hours at $2.13 plus $120 of tips, the employer owes $34 — and must have the signed tip certification to claim any credit at all.

Check a North Carolina 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: Virginia, Tennessee, Georgia, South Carolina.

Figures verified against primary sources on October 5, 2026