What code TP is
Beginning with tax year 2026 (the W-2 you get in January 2027), employers report a new Box 12 code: TP, "total amount of cash tips reported to the employer." It was created for the No Tax on Tips deduction, which lets tipped workers deduct up to $25,000 of qualified tips from federal taxable income for tax years 2025 through 2028.
"Cash tips" is IRS jargon and broader than it sounds. It means tips paid in cash, by credit or debit card, by check, through a mobile app, in casino chips, or through a tip pool or tip-out — anything you received and reported to your employer. What it doesn't include: mandatory service charges and automatic gratuities (the "18% added to parties of 8 or more"), because the customer couldn't decline them, so legally they're wages, not tips.
Box 14b: your occupation code
The 2026 W-2 also splits Box 14 into 14a (the old catch-all) and 14b, "Treasury Tipped Occupation Code." That's a three-digit number from the official IRS list of 71 occupations that customarily received tips before 2025. Wait staff is 102, bartenders 101, cooks 105, hairstylists 603, rideshare and taxi drivers 802, delivery drivers 804, and so on. If your job is on the list, you qualify; if it isn't, you don't, no matter how many tips you get. See the full list with codes.
What the number does and doesn't change
Code TP doesn't reduce your Box 1 wages. Your tips are still in Box 1, still in Box 7 (Social Security tips), and your employer still withheld income tax, Social Security and Medicare on them. The deduction happens when you file: you enter the TP amount, it goes to Schedule 1-A, Part II, the $25,000 cap and the income phase-out are applied, and your taxable income drops. FICA and self-employment tax don't change — this is an income-tax deduction only.
Because it only reduces income tax, the deduction is worth your marginal rate times the amount: $20,000 of tips in the 12% bracket saves about $2,400; in the 22% bracket, $4,400. Many full-time servers will see their federal income tax drop to zero or close to it.
Where to enter it
In tax software, the W-2 screen has Box 12 fields; choose code TP and enter the amount, then answer the occupation question (Box 14b). The software fills Schedule 1-A automatically. On paper, qualified tips from W-2s go on Schedule 1-A line 4a, with the phase-out on lines 9–13. No itemizing required.
What if code TP is missing?
For 2025 (the return you filed in early 2026), employers had relief from the new reporting, so many W-2s had nothing in Box 12. The IRS told workers to use Box 7 (Social Security tips) instead, with one catch: if Box 3 plus Box 7 equals exactly $176,100 — the 2025 Social Security wage cap — Box 7 may be understated and you should check your Form 4070 tip reports. Unreported tips that you declare on Form 4137 also count.
For 2026 and later, the reporting is mandatory. If your W-2 is missing TP or 14b and you reported tips, ask payroll for a corrected W-2 (Form W-2c) before you file.
The part most servers get wrong: unreported cash
Only tips reported to your employer get the deduction. Cash you kept off the books isn't in code TP and can't be deducted — and it was never legal to skip reporting it anyway. The new rule flips the math: for most tipped workers, reporting every dollar of tips now lowers their tax bill, because reported tips up to $25,000 come off taxable income while still counting toward Social Security credits and any loan application. If you've been under-reporting, this is the year to stop.
Self-employed and gig workers
If you're a 1099 driver, independent stylist or other self-employed tipped worker, there's no W-2. Your tips appear on Form 1099-NEC (box 1b), 1099-MISC (box 13a), or 1099-K, or in your own records, and you claim them on Schedule 1-A line 5. The deduction can't exceed the net profit of the business the tips came from. The calculator handles that limit.
Frequently asked questions
What is code TP on my W-2?
The total cash tips you reported to your employer for the year — the starting number for the No Tax on Tips deduction.
Do card tips count?
Yes. "Cash tips" includes card, check, app and pooled tips. Only mandatory service charges are excluded.
What is Box 14b?
Your Treasury Tipped Occupation Code — proof your job is on the eligible list.
Does code TP lower my Box 1?
No. The deduction is applied on your return via Schedule 1-A.
Is the $25,000 cap per person?
Per return. A married couple filing jointly shares one $25,000 cap.
What's code TT?
Qualified overtime compensation, for the overtime deduction. Explained here.