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No Tax on Tips: Ohio 2026 — What Tipped Workers Need to Know

Daniel · CountryTaxCalc Updated June 2026
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At a glance

Key Facts

Federal tip deduction (OBBBA)
Up to $25,000 — phases out above $150k AGI
Ohio income tax rate
0%–3.5% (graduated, flat 3.5% above ~$26,050)
FICA on tips
7.65% — still applies regardless of deduction
Ohio minimum cash wage for tipped workers
$5.45/hr (2026, 50% of state minimum)
OBBBA sunset
Deduction expires after December 31, 2028
Introduction
Ohio tipped workers — servers, bartenders, and hotel staff — now have a federal income tax deduction on tips up to $25,000 thanks to the One Big Beautiful Bill Act (OBBBA). But Ohio still taxes tip income under its own income tax rules. This guide explains exactly what Ohio tipped workers owe at the federal and state levels, and how to calculate your real take-home pay in 2026.
Section 01

What the Federal Tip Deduction Means for Ohio Workers

The OBBBA created a federal above-the-line deduction for qualified tips — cash and charge tips in traditional tipping industries (food service, hospitality, beauty services). For 2026–2028, Ohio tipped workers can deduct up to $25,000 in tip income from their federal taxable income. This phases out at $1 for every dollar of AGI above $150,000 (single) / $300,000 (MFJ). At $40,000 total income with $15,000 in tips, an Ohio server would eliminate federal income tax on those tips entirely — saving roughly $1,650 in federal tax (at a 10–12% bracket).
Section 02

Ohio Still Taxes Your Tips

Ohio has not enacted a state-level tip exemption. Ohio income tax is progressive with a flat top rate of 3.5% on income above $26,050 (the lower bracket taxes income at 2.765%). Tip income is fully included in Ohio adjusted gross income. On $15,000 in tips, Ohio income tax would be approximately $525 (at 3.5%). This is separate from the federal deduction — you save on federal tax but still pay Ohio state tax on the full amount of tips earned.
Section 03

FICA Taxes — the Unavoidable Part

FICA taxes are not affected by the OBBBA tip deduction. Social Security (6.2%) and Medicare (1.45%) apply to all tip income over $20/month. On $15,000 in tips, FICA costs $1,147.50. Your employer withholds half of this from your paycheck when tips are reported. If you receive cash tips that you report to your employer, they withhold the FICA due. If you have unreported tips (not recommended), you owe both the employee and employer share — effectively 15.3%.
Section 04

Ohio Tipped Wage Rate

Ohio sets the tipped minimum wage at 50% of the state minimum wage. For 2026, Ohio's minimum wage is $10.45/hour, making the tipped cash wage $5.45/hour. Employers can claim the $5.00/hour tip credit against the minimum wage. If tips plus tipped wages do not add up to the full minimum wage ($10.45), the employer must make up the difference.
Section 05

Worked Example: Ohio Server

Take an Ohio server earning $22,000 in wages plus $18,000 in tips ($40,000 total income, single, standard deduction). Federal taxable income: $40,000 − $14,600 standard deduction = $25,400 before OBBBA. OBBBA tip deduction: −$18,000 (under $25,000 cap). Remaining federal taxable income: $7,400. Federal income tax: ~$742. Ohio taxable income: $40,000 − $2,400 Ohio personal exemption = $37,600. Ohio income tax: ~$1,310. FICA on tips: $1,377. Total tax: ~$3,429 out of $40,000. Without the federal tip deduction, federal tax would be ~$2,932, costing $2,190 more. Use our No Tax on Tips Calculator for a precise figure at your income level.
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FAQ

Frequently Asked Questions

Do I have to report all my cash tips in Ohio?

Yes. You are legally required to report all tips to your employer and on your federal and Ohio state tax returns. Tips of $20 or more per month must be reported to your employer by the 10th of the following month using IRS Form 4070. Underreporting tips is tax fraud.

Does Ohio offer any state tax break on tips?

No. As of 2026, Ohio has not passed legislation to exempt tips from state income tax. The 3.5% top rate applies to all wage income including tips.

When does the federal tip deduction expire?

The OBBBA tip deduction is scheduled to expire after December 31, 2028. Congress would need to extend or make it permanent for it to continue beyond 2028. Until then, tipped workers should plan around the sunset.

What tipped occupations qualify in Ohio?

The OBBBA restricts the tip deduction to occupations that "customarily and regularly" receive tips in food, beverage, and hospitality services. This includes servers, bartenders, hotel housekeeping, casino dealers, and cosmetologists. Delivery drivers receiving tips through apps (DoorDash, Uber Eats) are in a gray area — the IRS is expected to issue guidance on this category.
Disclaimer:This guide is for educational purposes only and does not constitute tax, legal, or financial advice. The OBBBA is enacted legislation but regulations are still being finalized. Tax rates and laws change — verify current figures with the IRS and Ohio Department of Taxation. Consult a licensed tax professional for advice specific to your situation.
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