No Tax on Tips and Overtime in 2027: What the Law Already Says
Short answer: yes. Under current law, the federal deductions for qualified tips and qualified overtime apply to tax years 2025 through 2028, so they cover wages and tips you earn in 2027 (claimed on the return you file in early 2028) (IRS Fact Sheet FS-2025-03; 26 U.S.C. § 224).
What is already set in the law for 2027
| Item | 2027 rule (current law) | Source |
|---|---|---|
| Tips deduction cap | Up to $25,000 per return | IRS FS-2025-03 |
| Overtime deduction cap | Up to $12,500 ($25,000 joint) of the overtime premium | 26 U.S.C. § 225 |
| Phase-out | Reduced by $100 per $1,000 of MAGI over $150,000 ($300,000 joint) | IRS FS-2025-03 |
| SSN and filing status | Valid SSN required; married couples must file jointly | IRS FS-2025-03 |
| Itemizing needed? | No. Claimed on Schedule 1-A whether you itemize or not | IRS FS-2025-03 |
| Last year | 2028. Nothing in the statute extends it past 2028 | Public Law 119-21 |
The caps and the $150,000 / $300,000 thresholds are fixed dollar amounts in the statute. We found no inflation adjustment for them, so plan on the same numbers in 2027 unless Congress changes the law.
What is not known yet (labeled as projection)
- Final 2027 forms. The IRS publishes Schedule 1-A and its instructions each filing season. The 2027 version is not out; we expect it to follow the same structure, but that is a projection.
- Changes from Congress. Any extension past 2028 or change to the caps would need new legislation. None is law as of the date above.
- Your state. States decide for themselves whether to follow the federal deductions. Michigan, for example, has its own deduction for 2026–2028. See state taxes on tips and overtime.
How to get ready for 2027
- Check that your job is on the eligible list: tipped occupations that qualify.
- Watch your W-2 for the new reporting codes: W-2 Box 12 TP and TT codes.
- Know what overtime counts (only the premium part): qualified overtime.
- Estimate the phase-out if your income is high: phase-out explained.
- Avoid the usual errors: common mistakes.
Want it all on one page? Our tips and overtime deduction checklist covers the documents and steps.
Sources
General information, not tax advice.
→ Estimate your deduction with the free calculator
More guides
- 7 Common Mistakes Claiming No Tax on Tips or Overtime
- How to Claim No Tax on Tips and Overtime on Your Return (Schedule 1-A)
- No Tax on Tips: Federal Rules Explained (2025–2028)
- No Tax on Overtime: How Much Will I Save? Real Examples
- No Tax on Tips & Overtime Phase-Out Explained (MAGI $150,000 / $300,000)
- What Counts as Qualified Overtime for the No Tax on Overtime Deduction
- No Tax on Tips for Self-Employed and Gig Workers
- State Tax on Tips and Overtime: State-by-State Tracker (2025–2026)
- Does No Tax on Tips Apply to State Taxes?
- No Tax on Tips for Servers and Bartenders: Worked Examples
- Which Jobs Qualify for No Tax on Tips? Eligible Occupations
- W-2 Box 12 Codes TP and TT: Tips and Overtime Reporting