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Not tax-free — deductible. The difference is the whole game.
"No tax on tips, no tax on overtime" is really two above-the-line deductions with caps, phase-outs, and fine print that decides real money: only voluntary tips in IRS-listed occupations count (auto-gratuities don't), only the premium half of time-and-a-half counts for overtime, everything is still hit by payroll tax, and both deductions shrink $100 per $1,000 of MAGI over $150,000. This calculator turns your actual hours, rate, and tips into the deduction and the dollars it saves you — 2025 through 2028 only.
Servers, bartenders, and overtime-heavy hourly workers use it to convert the campaign slogan into the real deduction — only the premium half of OT counts, auto-gratuities don't, caps and MAGI phase-outs apply — and to see the actual dollar savings at their bracket instead of the headline promise.
No — it's a deduction, and only for the premium portion. If you earn $22/hour and work 120 overtime hours at $33, the deductible amount is the $11 premium × 120 = $1,320, not the $3,960 total. The deduction saves you your marginal rate on that amount (about $158–$290 for most brackets), and Social Security, Medicare, and state taxes still apply to every dollar.
Voluntary cash or card tips — including through tip pools — in occupations the IRS lists as customarily tipped before 2025 (roughly 70: servers, bartenders, hairdressers, delivery drivers, bellhops…). Mandatory service charges and auto-gratuities don't count. Tips must be reported — W-2 Box 7, tip logs, or Form 4137 for unreported tips. Self-employed workers in listed occupations qualify too, capped at net business income.
Both deductions phase out $100 for every $1,000 of MAGI above $150,000 single / $300,000 joint. Tips (cap $25,000) are fully gone at $400,000/$550,000; overtime (cap $12,500/$25,000) at $275,000/$550,000. Married couples must file jointly to claim either one. Both expire after 2028.