Can You Claim Both No Tax on Overtime and No Tax on Tips?
Yes — they're two separate deductions under different code sections, each with its own cap, phased out independently against the same income.
Updated 18 Sept 2026
Yes, a worker with both qualifying overtime pay and qualifying tips can claim both deductions in the same year. They're separate provisions of the tax code (26 U.S.C. §224 for tips, §225 for overtime), each with its own cap and its own phase-out, both measured against the same modified adjusted gross income — neither deduction reduces the MAGI used to calculate the other.
What does this mean for you? Work out your own number: No tax on overtime calculator
A server who works a double shift into overtime, or a bartender on a scheduled overtime week, has both kinds of qualifying income at once — and the two 2025 tax law deductions don’t compete with each other.
Two separate code sections, two separate caps
The tips deduction lives at 26 U.S.C. §224; the overtime deduction is a different section, §225. They were written together, phase out using an identical formula, and share the same $150,000/$300,000 MAGI threshold — but each has its own dollar cap, checked independently:
- Tips: up to $25,000, flat regardless of filing status.
- Overtime: up to $12,500 single, $25,000 joint.
A single filer with both could in principle deduct up to $37,500 combined ($25,000 tips + $12,500 overtime) before either phase-out reduces anything — see the overtime and tips phase-out details for how each is reduced above the threshold.
Neither deduction shrinks the other’s MAGI
The MAGI used to phase out each deduction is essentially adjusted gross income (with a couple of foreign-income add-backs) — it isn’t reduced by the tips or overtime deduction itself. That means claiming the tips deduction doesn’t lower the MAGI figure used to calculate the overtime phase-out, or vice versa: both are measured against the same starting MAGI, independently.
Filing status still has to match for both
Both deductions carry the identical rule that married filing separately can’t claim them at all, at any income. If you’re filing separately, having qualifying income of both kinds doesn’t change that — neither deduction is available.
The occupation and FLSA tests still apply separately
Qualifying for one doesn’t automatically qualify you for the other — the tips deduction still requires an occupation on Treasury’s published list, and the overtime deduction still requires the pay to be FLSA-mandated overtime, not a more generous contractual or state-law rate. A worker could have qualifying tips but non-qualifying “overtime” (say, a union contract rate beyond FLSA’s requirement), and only claim the tips side.
To see both deductions together against your actual numbers, run your MAGI, tips and overtime premium through the no-tax-on-tips and no-tax-on-overtime calculators — each shows its own deduction and estimated tax savings independently.