W-2 Box 12 code TP

$40,000.00 in box 12, code TP, is not a $40,000.00 deduction. The tips cap is $25,000.00 on a single return at $80,000 of MAGI, and that $25,000 cap does not double when you file jointly.

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Tips deduction

$25,000.00

The tips deduction is $25,000.00. Code TP is the cash tips reported.

Deduction 63%
Code TP above the deduction 38%

Code TP is cash tips reported to the employer. Box 14b is the occupation code. Only qualified tips are deductible. The reported amount is above the cap or the phase-out, so the deduction is smaller. Social Security and Medicare still apply. Tax saved uses 2026 brackets.

Breakdown

Breakdown
Box 12 code TP	$40,000.00
Tips deduction	$25,000.00
Federal income tax saved	$4,350.00
Reported above the deduction	$15,000.00

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Deduction = code TP, then the $25,000 cap and the same MAGI phase-out as overtime. The cap does not double on a joint return.

What code TP is

The 2026 W-2 instructions tell the employer to put the total cash tips reported to the employer in box 12, code TP. Tips of $20 or more in a month are still generally subject to income-tax withholding and to Social Security and Medicare tax, both shares. Code TP is the cash tips figure. Whether those tips are qualified tips, and how much you can deduct, is a separate step.

When code TP is present, box 14b must list a Treasury Tipped Occupation Code. The instructions allow up to two codes. If the tips came from more than two occupations, the employer picks two. If any tips were from a nonqualifying occupation, one of the codes is 000. The code list is on IRS.gov/TippedOccupations. This page does not reprint that list.

Mandatory service charges added to a bill are not qualified tips. The deduction cap is $25,000 on every return, including a joint return. Married filing separately cannot claim it. The phase-out matches overtime: $100 for each full $1,000 of modified AGI over $150,000, or over $300,000 joint. Overtime on the same W-2 is code TT, not code TP.

Worked examples

$40,000 of cash tips, single, $80,000 MAGI
Code TP	$40,000.00
Deduction	$25,000.00
Tax saved	$4,350.00

$18,000 of cash tips, under the cap
Deduction	$18,000.00
Tax saved	$3,510.00

Common questions

What is W-2 box 12 code TP?

It is the total cash tips you reported to your employer. The 2026 Form W-2 uses code TP in box 12 for that total. It is not, by itself, the amount you can deduct.

What goes in box 14b?

A Treasury Tipped Occupation Code, up to two of them, for the occupations the tips came from. If any tips were from a nonqualifying occupation, one code must be 000. The IRS publishes the codes at IRS.gov/TippedOccupations.

Are service charges in code TP?

A mandatory service charge the business adds to the bill is not a qualified tip. Code TP is the cash tips reported to the employer. The deduction still leaves out tips that are not qualified tips.

Does the tips cap double on a joint return?

No. The qualified-tips cap stays $25,000 on a joint return. The overtime cap is the one that rises to $25,000 joint from $12,500. Married filing separately cannot claim the tips deduction.