Yes, you can claim both. The OBBBA tips deduction (up to $25,000) and overtime deduction (up to $12,500 single / $25,000 MFJ) are additive. A single filer who qualifies for both can reduce federal AGI by up to $37,500. Both phase out starting at $150,000 AGI and both sunset after 2028.
At a glance
Key Facts
Maximum Combined Deduction: $37,500 (Single Filer)
A single filer who qualifies for both the full tips deduction and the full overtime deduction can reduce federal AGI by up to $37,500: $25,000 tips + $12,500 overtime. At a 22% marginal rate, this saves approximately $8,250 in federal income tax. A married couple filing jointly can deduct up to $50,000 combined ($25,000 tips + $25,000 overtime).
The Two Deductions Are Separate and Additive
The tips deduction and overtime deduction are distinct provisions with separate caps and qualification requirements. Claiming one does not reduce the other. You can earn $25,000 in tips and $12,500 in overtime pay in the same year and deduct both amounts in full (assuming income below the phase-out threshold). The deductions are reported on separate lines of Form 1040.
Phase-Out Applies to Each Deduction Separately
Each deduction phases out independently starting at $150,000 MAGI (single) / $300,000 (MFJ) and is fully phased out at $200,000 (single) / $400,000 (MFJ). The phase-out is calculated separately for tips and for overtime — it is not a combined phase-out. Most overtime-earning tipped workers (servers, bartenders, hotel staff) earn well below $150,000 and qualify for both deductions in full.
Who Earns Both Tips and Overtime
Workers most likely to qualify for both deductions: restaurant servers working double shifts, bartenders at high-volume venues, hotel banquet staff working event weekends, casino workers with both base wages and tips, rideshare drivers who also work in hospitality, and delivery drivers in tipped occupations. The key requirement: tip income must come from a customary-tipping occupation, and overtime must be FLSA-qualifying overtime (hours paid at 1.5x+ the regular rate for hours exceeding 40/week under federal law, or 8/day under California law).
Worked Example: Busy Restaurant Worker, 2026
Server/shift lead, $50,000 wages + $28,000 tips + $8,500 overtime pay = $86,500 gross income. Both deductions claimed: $25,000 tips + $8,500 overtime (below the $12,500 cap) = $33,500 total deduction from AGI. At 22% marginal rate: federal savings = $7,370. Without OBBBA: the same worker would owe federal income tax on the full $86,500 (less standard deduction). State conformity varies — check your state.
Introduction
Double Deductions: Tips + Overtime in the Same Tax Year
The One Big Beautiful Bill Act created two separate above-the-line deductions for working Americans: one for qualified tip income (up to $25,000) and one for overtime compensation (up to $12,500 for single filers, $25,000 for married filing jointly). These deductions are independent — you can claim both if you earn both types of income. For workers in tipped, hourly jobs who also regularly earn overtime, this stacking can produce substantial federal income tax savings in 2026. This guide explains how the deductions interact, who qualifies for both, and how to calculate the combined benefit.
Section 01
How Tips and Overtime Qualify Separately
Understanding what qualifies under each deduction prevents filing errors.
Qualifying Tip Income
Tips must be: (1) received in an occupation where tipping is customary — food service, hospitality, personal care services, delivery; (2) voluntary (not mandatory service charges, which are wages); and (3) properly reported to your employer via IRS Form 4070. The deduction covers cash tips, credit card tips, and tip pool distributions you receive. You cannot deduct tips you paid out to other workers in a tip pool — only the net tips you kept.
Qualifying Overtime Pay
Overtime must be: (1) paid as overtime compensation under the FLSA or applicable state law (at least 1.5x the regular rate for hours over 40/week federally, or hours over 8/day in California); (2) paid by an employer to an employee (not self-employed overtime); and (3) included in W-2 Box 1 as wages. Most overtime earned by hourly employees at time-and-a-half or double time qualifies. Salary employees who are FLSA-exempt do not receive FLSA overtime and therefore do not qualify for this deduction.
They Can Come from Different Employers
You do not need to earn both tips and overtime from the same job. If you work two jobs — one tipped position and one hourly position where you earn overtime — you can claim each deduction for the respective income type. Add your tip income from all qualifying jobs and your overtime from all qualifying jobs, capping each at its respective limit ($25,000 tips, $12,500 single OT).
Section 02
Calculating Your Combined Benefit
Use the No Tax on Tips Calculator and No Tax on Overtime Calculator independently, then add the results.
Step-by-Step Calculation
Step 1: Calculate your total qualified tip income for the year. Cap at $25,000. Check whether your MAGI is below $150,000 (single) or $300,000 (MFJ). If below, the full tips deduction applies. If above, calculate the phase-out reduction.
Step 2: Calculate your total qualifying overtime pay for the year. Cap at $12,500 (single) or $25,000 (MFJ). Apply the same phase-out check — same $150,000/$300,000 thresholds.
Step 3: Add the two deduction amounts together. This is your total combined OBBBA deduction from AGI.
Step 4: Multiply by your marginal tax rate for an estimate of your federal income tax savings. Common rates: 12% bracket → savings = combined deduction × 12%; 22% bracket → savings = combined deduction × 22%.
Tips deduction: $20,000 (full amount, below $25,000 cap and below $150,000 phase-out). Overtime deduction: $10,000 (below $12,500 cap). Total deduction from AGI: $30,000. Federal savings at 22%: $6,600. Use the calculators at /tax-calculator/usa/no-tax-on-tips/ and /tax-calculator/usa/no-tax-on-overtime/ for personalized amounts.
Section 03
State Conformity for the Combined Deductions
State tax treatment of tips and overtime deductions is independent for each state and for each deduction type. A state might conform to the tips deduction but not the overtime deduction, or vice versa.
Check Your State's Position on Each Deduction Separately
Examples: Florida — no state income tax, so neither deduction matters at the state level. Texas — no state income tax. California — conforms to neither deduction at the state level (workers add back both on their CA return). Georgia — conforms to the federal OBBBA tips deduction AND has a separate $1,750 state tip exemption; check Georgia DOR for overtime deduction conformity status. Michigan — actively conforms to the federal OBBBA overtime deduction; check Michigan DOR for tips conformity.
Both Deductions Sunset After 2028
Both the tips deduction and the overtime deduction expire after the 2028 tax year. If you are claiming both and building your budget around the combined savings, plan for the possibility that one or both expire in 2029. Make the most of the deductions while they apply.
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Can I claim both the tips deduction and the overtime deduction?
Yes. The OBBBA tips deduction (up to $25,000) and overtime deduction (up to $12,500 single / $25,000 MFJ) are separate, additive deductions. A single filer qualifying for both can reduce federal AGI by up to $37,500. Both deductions phase out starting at $150,000 MAGI (single) and both expire after 2028.
Q
What is the maximum combined OBBBA deduction for 2026?
For a single filer: $25,000 (tips) + $12,500 (overtime) = $37,500 maximum combined deduction. For married filing jointly: $25,000 (tips) + $25,000 (overtime) = $50,000. At a 22% marginal rate, the single filer maximum saves $8,250 in federal income tax; the MFJ maximum saves $11,000.
Q
What jobs typically earn both tips and overtime?
Workers most likely to qualify for both: restaurant servers and shift leads working long hours, bartenders at high-volume venues, hotel banquet and catering staff, casino workers, and delivery drivers in tipped occupations. The job must involve tipping-customary work AND pay overtime for hours over 40/week (or 8/day in California).
Q
Do the tips and overtime deductions share a single phase-out?
No. Each deduction has its own independent phase-out calculation, both starting at $150,000 MAGI (single) / $300,000 (MFJ) and fully phased out at $200,000 / $400,000. They are calculated separately, not combined for phase-out purposes.
Q
Can I earn overtime and tips from different jobs?
Yes. You can claim tips from one job and overtime from a different job in the same tax year. Add all qualifying tip income across all tipped jobs (capped at $25,000 total) and all qualifying overtime pay across all jobs (capped at $12,500 single or $25,000 MFJ total).
Disclaimer:For informational purposes only. This is not tax advice. Consult a qualified tax professional for your specific situation.