Guide
Tips and overtime on your 2026 W-2
Two new Box 12 codes and one new box decide whether you can claim these deductions at all. Here is where to look and what to do if they are wrong.
Why the form changed
For tax year 2026 the IRS added codes to Form W-2 so that qualified tips and qualified overtime are reported separately from ordinary wages. This is not paperwork trivia: only amounts reported this way are deductible. If your employer does not break them out, you can lose the deduction even though you earned it.
You will see these on the W-2 you receive in January 2027, covering your 2026 pay.
Where each number lives
| Where | What | Detail |
|---|---|---|
| Box 12, code TP | Qualified tips | The tip income eligible for the deduction. Voluntary tips only — cash, card, check or electronic. |
| Box 12, code TT | Qualified overtime | The FLSA premium only: the extra half of time-and-a-half, not your whole overtime pay. |
| Box 12, code TA | Trump account contributions | Employer contributions under a Section 128 program. Unrelated to tips or overtime. |
| Box 14b | Treasury Tipped Occupation Code | Up to two TTOCs identifying your tipped occupation. 000 means the occupation does not qualify. |
| Box 7 | Social Security tips | Unchanged. Tips are still subject to Social Security tax. |
| Box 8 | Allocated tips | Unchanged. Still used where an employer allocates tips. |
Box 12 code TT is smaller than you expect
The figure next to TT is not your overtime earnings. It is only the premium the Fair Labor Standards Act requires — the extra half of time-and-a-half. If you were paid $12,000 in overtime over the year, TT will show roughly $4,000.
That is correct, not an error. The base portion of overtime is ordinary wages and is already inside Box 1.
Service charges are not tips
The automatic gratuity added to a large party’s bill is a service charge, not a voluntary tip. It does not belong in code TP and is not deductible. Employers have to track the two separately. If your restaurant pools auto-gratuity into your tip line, your TP figure may be overstated — which is a problem for you, not for them.
Box 14b and the occupation code
Box 14b carries your Treasury Tipped Occupation Code. An employer can list up to two, for people who work in more than one tipped role. A code of 000means the occupation is not on Treasury’s list and those tips are not deductible.
If you see 000 and you believe your job qualifies, that is worth raising immediately. Check the official list first so you can point to the exact code.
What to do before the year closes
Do not wait for January. Look at a current pay stub now and check three things:
- Is overtime shown with the premium portion identified separately, or as one lump figure?
- Are tips separated from service charges?
- Does payroll know your tipped occupation code?
If any answer is no, ask payroll now. Fixing a system in November is an inconvenience. Fixing a W-2 in April means a corrected W-2c, a delayed return, and a deduction you may not get at all.
If your W-2 arrives wrong
Ask your employer for a corrected form, Form W-2c. Do not simply enter the number you think is right — the IRS matches your return against what your employer filed, and a mismatch invites a notice. If the employer will not correct it, that is the point to speak to a tax professional.
What the tips figure is worth to you
Your estimated qualified tips deduction
$22,500
Cuts your taxable income by $22,500 when you file.
Federal tax you would save
$2,482
Roughly $2,482 more refund, or that much less owed, for tax year 2026.
“No tax on tips” does not mean tax-free tips. You still owe Social Security and Medicare on every tipped dollar — about $1,721 on your tips alone — and you must still report all of them. What changed is a deduction against federal income tax, claimed on your return.
How we got there
Your year at a glance
Estimate for tax year 2026 using the published IRS figures. It assumes you take the standard deduction, have no dependents or credits, and that you work in an occupation that customarily and regularly receives tips. It is not tax advice.
Figures on this page are for tax year 2026 and were last checked against the primary sources on 2026-07-31. See our sources. This is an estimate, not tax advice.