Annual Tips
$24,000
Tax on Tips
$5,592
Net Tips (Annual)
$18,408
Net Tips (Monthly)
$1,534
Are tips taxable income?
Yes, all tips are considered taxable income by the IRS. This includes cash tips, credit card tips, and tips received through tip-sharing arrangements. If you receive more than $20 in tips in any month, you must report them to your employer, who will withhold income tax, Social Security, and Medicare taxes.
How do I report tips to the IRS?
You must report tips to your employer using IRS Form 4070 (or a similar statement) by the 10th of the month following the month you received tips. Your employer then withholds taxes. If you have unreported tips, you must report them on IRS Form 4137 when filing your annual return and pay the additional Social Security and Medicare taxes.
What is IRS Form 4137?
Form 4137 (Social Security and Medicare Tax on Unreported Tip Income) is used when filing your annual tax return to report tips not reported to your employer and to calculate the Social Security and Medicare tax owed on those unreported tips. The IRS requires you to keep a daily tip log as documentation.
What is the tipped minimum wage?
The federal tipped minimum wage is $2.13/hour, provided that tips bring the total to at least $7.25/hour (the federal minimum). Many states have higher tipped minimum wages -- some states like California, Washington, and Oregon require full minimum wage before tips. Employers must make up any shortfall.
IRS-Aligned: Uses 2025 federal tax brackets, FICA rates, and state tax codes. Tip tax is calculated as the marginal tax on tips above your base salary.
Disclaimer: This calculator provides estimates based on current IRS rates and thresholds for the 2025 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your filing status, state of residence, deductions, and individual circumstances. Always consult a qualified tax professional or CPA before making financial decisions. Read our terms
This calculator uses official rates and thresholds from:
- IRS Topic 761 — Tips — Withholding and Reporting
- IRS Publication 1244 — Employee's Daily Record of Tips
- IRS Publication 525 — Taxable and Nontaxable Income
Last verified: March 2026 · Tax year 2025. Results are indicative — consult a qualified accountant for personalised advice.