No Tax on Tips & Overtime Phase-Out Explained (MAGI $150,000 / $300,000)

Last checked 2026-10-25 against IRS guidance

Both deductions shrink once your modified adjusted gross income (MAGI) passes $150,000 (single, head of household) or $300,000 (married filing jointly). The reduction is $100 for each $1,000 over the threshold, applied after the cap.

Worked example: single tipped worker

Qualified tips: $30,000 → capped at $25,000
MAGI: $180,000 → $30,000 over → reduction $3,000
Deduction: $22,000

Worked example: joint filers with overtime

Qualified overtime premium: $18,000 (under the $25,000 joint cap)
MAGI: $340,000 → $40,000 over → reduction $4,000
Deduction: $14,000

When does it fully disappear?

The full $25,000 tips deduction reaches $0 at $400,000 MAGI single ($150,000 + $250,000) or $550,000 joint. The $12,500 single overtime cap reaches $0 at $275,000; the $25,000 joint overtime cap at $550,000.

The statute says "$100 for each $1,000." Our calculator applies this proportionally (10% of the excess). If the Schedule 1-A instructions round to whole $1,000 steps, your result could differ slightly.

Sources

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No Tax on Tips & Overtime Phase-Out Explained (MAGI $150,000 / $300,000)

Worked example: single tipped worker

Worked example: joint filers with overtime

When does it fully disappear?

Sources

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