W-2 Box 12 Code TP — Qualified cash tips (OBBBA no tax on tips)
New for tax year 2026 W-2s — total cash tips reported to your employer, used to substantiate the OBBBA qualified tips deduction (up to $25,000, phased out above $150k single / $300k MFJ MAGI, tax years 2025–2028).
Estimate this deduction: Use the No Tax on Tips Calculator to see exactly how much Box 12 Code TP is worth on your return.
At a glance — Box 12 Code TP
- Box name
- Qualified cash tips (OBBBA no tax on tips)
- Reports to
- Schedule 1-A (Form 1040), Additional Deductions — flows to the above-the-line deductions total on Form 1040. Not reported directly on Line 1a.
- Check against
- Your reported cash tips for the year — should generally match Box 7 (Social Security tips) on your W-2, or your own tip records if you don't receive a W-2.
What Box 12 Code TP means
Code TP is a new W-2 Box 12 code, first appearing on the tax year 2026 Form W-2 (the one you'll receive in January 2027), reporting the total qualified cash tips you reported to your employer for the year. It exists to substantiate the qualified tips deduction created by the One Big Beautiful Bill Act (OBBBA) — new IRC §224 — without redesigning Boxes 1, 3, 5, or 7. For tax year 2025 returns (filed in 2026), the IRS granted transition relief in Notice 2025-62 (penalty relief for employers) and Notice 2025-69 (guidance for taxpayers): employers were not required to separately report qualified tips on the 2025 W-2, and employees could still claim the deduction using Box 7 or their own records.
Qualified tips must be cash tips (including tips paid by debit/credit card and passed through by the employer) received in an occupation that customarily and regularly received tips on or before December 31, 2024, voluntarily given by the customer — not an automatic service charge or mandatory gratuity — and reported to the employer. The deduction itself is claimed on new Schedule 1-A (Form 1040), capped at $25,000 per return, and phases out for MAGI above $150,000 (single/HoH) or $300,000 (married filing jointly), reducing by $100 for every $1,000 over the threshold. Married taxpayers must file a joint return to claim it at all — married filing separately does not qualify.
Box 14b on the redesigned 2026 W-2 pairs with code TP: employers enter a Treasury-assigned 'tipped occupation code' (up to two) identifying the occupation the tips relate to, since eligibility depends on working in a customarily-tipped occupation.
Tax return implications
- Feeds new Schedule 1-A (Form 1040), an above-the-line deduction available whether you itemize or take the standard deduction — it does not change Box 1, 3, 5, or 7 wages themselves.
- Does NOT reduce Social Security or Medicare tax — FICA (7.65%) still applies to the full tip amount reported in Box 7, even though the income tax deduction is claimed separately.
- Combined with the qualified overtime deduction (Box 12 code TT) and other Schedule 1-A items, but each has its own separate cap — they don't share a combined limit.
Common pitfalls & things to check
- The deduction is temporary — available for tax years 2025 through 2028 only, unless Congress extends it.
- Married filing separately does not qualify for the deduction at all, regardless of income level.
- Automatic/mandatory service charges (e.g., large-party gratuities added to the bill) generally aren't 'tips' for this deduction — only voluntary, customer-chosen tips count.
FAQ
Is Box 12 Code TP the same as Box 7?
Related but not identical. Box 7 (Social Security tips) is the FICA-taxable tip total that has been on the W-2 for decades. Code TP, new for tax year 2026, is the total your employer separately identifies to substantiate the OBBBA qualified tips deduction on Schedule 1-A.
What if my 2025 W-2 doesn't show code TP?
That's expected — code TP first appears on tax year 2026 W-2s (received January 2027). For your 2025 return, use Box 7 or your own tip records; the IRS granted 2025 transition relief so employers weren't required to separately report qualified tips (Notice 2025-62 / Notice 2025-69).
Related W-2 boxes
Box 12 — Codes (401(k), HSA, health coverage, ISO, and more)
Up to four labeled amounts (12a–12d) using IRS codes. Common codes: D (401(k) elective deferral), DD (employer health coverage cost), W (employer + employee HSA contributions), AA (Roth 401(k)).
Box 12 Code D — Elective deferrals to a 401(k) plan
Your traditional (pre-tax) 401(k) elective deferrals. Reduces Box 1 dollar-for-dollar, up to the annual §402(g) elective deferral limit (higher with age-50 catch-up and SECURE 2.0 ages-60–63 super-catch-up).
Box 12 Code DD — Cost of employer-sponsored health coverage
The total cost (employer + employee share) of your employer-sponsored group health coverage. Informational only — does not affect your tax.
Box 12 Code E — Elective deferrals to a 403(b) plan
Your traditional (pre-tax) 403(b) elective deferrals. Reduces Box 1 up to the annual §402(g) limit, with a special 15-year catch-up for long-tenured employees of certain nonprofits.
Reconciling your W-2 at tax time? Use the paycheck calculator to verify expected federal, Social Security, and Medicare withholdings on your salary, and the federal income tax calculator to estimate your refund or balance owing before you file.
Related Calculators
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W-4 Withholding Calculator
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FICA & Social Security
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Tax Refund Estimator
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401(k) Calculator
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Sources
W-2 box definitions per IRS General Instructions for Forms W-2 and W-3 and IRC §6051. Rates and thresholds current for tax year 2025 (file by April 15, 2026); 2026 figures included where published.