Tipped minimum wage is the lowest amount that businesses, like restaurants and resorts, can pay their tipped employees. Currently, the federal tipped minimum wage is $2.13 per hour, but each state has its own regulation.
The tipped minimum wages paid by the employer plus the tips received need to equal at least the full minimum wage when combined (the federal minimum wage is currently $7.25 an hour; states vary). Otherwise, employers are responsible for making up the difference. Paying tipped minimum wage can save money, but calculations can be time-consuming, and participating employers are subject to oversight.
How Tipped Minimum Wage Works
Tipped minimum wage allows tipped employees to be paid at a lower rate by their employer. Per federal law, tipped employees are workers who regularly receive more than $30 a month in tips.
Employees who would be considered “tipped employees” include, but are not limited to:
- Waitstaff: Waitstaff includes the servers (waiters and waitresses) who take food and drink orders and deliver them to customers.
- Bartenders: Bartenders typically work behind the bar serving alcoholic beverages.
- Valet parking attendants: Valet parking attendants provide a parking service to incoming customers, usually at a high-end restaurant or hotel.
Although there are other employee types, such as cooks and hosts, who may regularly receive tips as part of a tip-sharing program, you aren’t allowed to pay them a tipped employee minimum wage.
If you have tipped employees and are in a state that follows the federal minimum wage, you can apply a federal tax credit of up to $5.12 per hour to reduce their hourly cash rate paid. This equals a federal minimum tipped wage of $2.13 per hour ($7.25 – $5.12). Many states have their own maximum credit against that minimum wage that determines how much of an employee’s income can be made up of tips. You’ll have to account for this in your employees’ pay and may change how you do payroll.
Tipped employees are responsible for tracking and reporting tips received from all sources, and you’re required to report the information to the IRS. Any errors, whether intentional or not, can lead to penalties and unexpected taxes for violation of payroll compliance laws.
Remember, the $2.13 tipped workers minimum wage only relates to federal law; as shown below, many states have their own tipped minimum wage laws in place. When faced with conflicting federal, state, and local wage laws, always abide by the ones that give employees the most protection.
State-by-State Tipped Minimum Wage
There’s no standard tipped employee minimum wage for each state. States like Texas and Georgia don’t have any specific wage laws for tipped employees and follow the federal rate. Some states (Florida and Colorado, for example), have tipped minimum wage rates higher than the $2.13 federal rate, while Montana, Nevada, and other states don’t allow paying a tipped minimum wage, requiring employers to pay the full state minimum wage.
Click on any state in the map below to view the tipped minimum wage and max credit against the minimum wage for that state.
Tipped Minimum Wage Clickable State Map
State-by-State Tipped Minimum Wage
Alabama
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Alaska
- Tipped Minimum Wage: $11.73
- Max Credit Against Minimum Wage: No tip credit allowed
- Minimum Wage with Tips: $11.73
*Required to pay tipped employees full state minimum wage before tips
Arizona
- Tipped Minimum Wage: $11.35
- Max Credit Against Minimum Wage: $3.00
- Minimum Wage with Tips: $14.35
Arkansas
- Tipped Minimum Wage: $2.63
- Max Credit Against Minimum Wage: $7.37
- Minimum Wage with Tips: $11.00
California
- Tipped Minimum Wage: $16.00
- Max Credit Against Minimum Wage: No tip credit allowed
- Minimum Wage with Tips: $16.00
*Required to pay tipped employees full state minimum wage before tips
Colorado
- Tipped Minimum Wage: $11.40
- Max Credit Against Minimum Wage: $3.02
- Minimum Wage with Tips: $14.42
Connecticut
- Tipped Minimum Wage: Hotel/Restaurant: $6.38
Bartenders: $8.23
- Max Credit Against Minimum Wage: Hotel/Restaurant: $9.31
Bartenders: $7.46
- Minimum Wage with Tips: $15.69
Delaware
- Tipped Minimum Wage: $2.23
- Max Credit Against Minimum Wage: $11.02
- Minimum Wage with Tips: $13.25
District of Columbia
- Tipped Minimum Wage: $8.00
- Max Credit Against Minimum Wage: $9.00
- Minimum Wage with Tips: $17.00
*Difference between tipped wage and minimum wage—planning to phase out by 2027
Florida
- Tipped Minimum Wage: $8.98
- Max Credit Against Minimum Wage: $3.02
- Minimum Wage with Tips: $12.00
Georgia
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Hawaii
- Tipped Minimum Wage: $12.75
- Max Credit Against Minimum Wage: $1.25*
- Minimum Wage with Tips: $14.00
*Credit applies only if the server earns $7 over minimum wage in wages + tips
Idaho
- Tipped Minimum Wage: $3.35
- Max Credit Against Minimum Wage: $3.90
- Minimum Wage with Tips: $7.25
Illinois
- Tipped Minimum Wage: $8.40
- Max Credit Against Minimum Wage: $5.60
- Minimum Wage with Tips: $14.00
*Maximum tip credit must be 40% of the applicable minimum wage
Indiana
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Iowa
- Tipped Minimum Wage: $4.35
- Max Credit Against Minimum Wage: $2.90
- Minimum Wage with Tips: $7.25
*maximum tip credit must be 40% of the applicable minimum wage
Kansas
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Kentucky
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Louisiana
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Maine
- Tipped Minimum Wage: $7.08
- Max Credit Against Minimum Wage: $7.07
- Minimum Wage with Tips: $14.15
*maximum tip credit must be 50% of the applicable minimum wage
Maryland
- Tipped Minimum Wage: $3.63
- Max Credit Against Minimum Wage: $11.37
- Minimum Wage with Tips: $15.00
*Howard and Montgomery counties have slightly higher minimum wages.
Massachusetts
- Tipped Minimum Wage: $6.75
- Max Credit Against Minimum Wage: $8.25
- Minimum Wage with Tips: $15
Michigan
- Tipped Minimum Wage: $3.93
- Max Credit Against Minimum Wage: $6.40
- Minimum Wage with Tips: $10.33
*tipped minimum wage must be 38% of the applicable minimum wage
Minnesota
- Tipped Minimum Wage: Employer revenue < $500,000: $8.85
Employer revenue > $500,000: $10.85
- Max Credit Against Minimum Wage: No tip credit allowed
- Minimum Wage with Tips: Employer revenue < $500,000: $8.85
Employer revenue > $500,000: $10.85
*Required to pay tipped employees full state minimum wage before tips
Mississippi
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Missouri
- Tipped Minimum Wage: $6.15
- Max Credit Against Minimum Wage: $6.15
- Minimum Wage with Tips: $12.30
*maximum tip credit must be 50% of the applicable minimum wage
Montana
- Tipped Minimum Wage: $10.30*
- Max Credit Against Minimum Wage: No tip credit allowed
- Minimum Wage with Tips: $10.30*
*$4.00 for businesses not covered by FLSA with gross annual sales <$110,000;
Required to pay tipped employees full state minimum wage before tips
Nebraska
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $9.87
- Minimum Wage with Tips: $12
Nevada
- Tipped Minimum Wage: No Health Insurance: $11.25
w/ Health Insurance: $10.25
- Max Credit Against Minimum Wage: No tip credit allowed
- Minimum Wage with Tips: No Health Insurance: $11.25
w/ Health Insurance: $10.25
*Required to pay tipped employees full state minimum wage before tips
New Hampshire
- Tipped Minimum Wage: $3.27
- Max Credit Against Minimum Wage: $3.98
- Minimum Wage with Tips: $7.25
New Jersey
- Tipped Minimum Wage: $5.26
- Max Credit Against Minimum Wage: $9.87
- Minimum Wage with Tips: $15.13
New Mexico
- Tipped Minimum Wage: $3.00
- Max Credit Against Minimum Wage: $9.00
- Minimum Wage with Tips: $12.00
New York
- Tipped Minimum Wage: Food Workers: $10.00
Service: $12.50
- Max Credit Against Minimum Wage: Food Workers: $5.00
Service: $2.50
- Minimum Wage with Tips: $15.00
*Rates in NYC and Long Island differ from state minimum; $13.35/$2.65/$16.00 (Service); $10.65/$5.35/$16.00 (Food)
North Carolina
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12*
- Minimum Wage with Tips: $7.25
*Tip credit is not allowed unless the employer obtains a signed certification of the amount of tips received by each employee.
North Dakota
- Tipped Minimum Wage: $4.86
- Max Credit Against Minimum Wage: $2.39
- Minimum Wage with Tips: $7.25
*maximum tip credit must be 33% of the applicable minimum wage
Ohio
- Tipped Minimum Wage: $5.25
- Max Credit Against Minimum Wage: $5.20
- Minimum Wage with Tips: $10.45
*applies to employers with annual gross receipts of $385,000 or more
Oklahoma
- Tipped Minimum Wage: $2.13*
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
*$2 for businesses earning <100K per year
Oregon
- Tipped Minimum Wage: $14.20*
- Max Credit Against Minimum Wage: No tip credit allowed
- Minimum Wage with Tips: $14.20
*Varies by region. Consult Oregon.gov for a map to see minimums in your area
Pennsylvania
- Tipped Minimum Wage: $2.83*
- Max Credit Against Minimum Wage: $4.42
- Minimum Wage with Tips: $7.25
*Only applies if employee makes at least $135 in tips per month
Rhode Island
- Tipped Minimum Wage: $3.89
- Max Credit Against Minimum Wage: $10.11
- Minimum Wage with Tips: $14.00
South Carolina
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
South Dakota
- Tipped Minimum Wage: $5.60
- Max Credit Against Minimum Wage: $5.60
- Minimum Wage with Tips: $11.20
Tennessee
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Texas
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Utah
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Vermont
- Tipped Minimum Wage: $6.84
- Max Credit Against Minimum Wage: $6.83
- Minimum Wage with Tips: $13.67
*applies to employees of a hotel, motel, tourist place, or restaurant receiving >$120.00 per month in tips
Virginia
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $9.87
- Minimum Wage with Tips: $12
Washington
- Tipped Minimum Wage: $16.28
- Max Credit Against Minimum Wage: No tip credit allowed
- Minimum Wage with Tips: $16.28
*Required to pay tipped employees full state minimum wage before tips
West Virginia
- Tipped Minimum Wage: $2.62
- Max Credit Against Minimum Wage: $6.13
- Minimum Wage with Tips: $8.75
*state minimum wage law applies only to employers with six or more employees.
Wisconsin
- Tipped Minimum Wage: $2.33*
- Max Credit Against Minimum Wage: $4.92
- Minimum Wage with Tips: $7.25
*$2.13 per hour may be paid to employees who are not yet 20 years old and who have been in employment status with a particular employer for 90 or fewer consecutive calendar days from the date of initial employment.
Wyoming
- Tipped Minimum Wage: $2.13
- Max Credit Against Minimum Wage: $5.12
- Minimum Wage with Tips: $7.25
Related Laws for Tipped Minimum Wage
Paying your state’s tipped minimum wage subjects you to potential oversight in reporting. You’re responsible for notifying all new hires of your tip credit policies before they begin working. In addition, federal law requires that you withhold payroll taxes from all tips, whether received in cash, by credit card, or other means. This leads to additional reporting responsibilities for your employees, who must be honest about the tips they receive directly from customers.
Keep in mind that although your state may give you the option to take a tip credit, you shouldn’t feel forced to participate. Instead, you can pay your employees the minimum wage that applies to your state. You can also opt to take a partial credit against your employees’ hourly wages, which allows you to take advantage of the tip credit allowance while ensuring your employees are paid at least minimum wage. For instance, for the federal tipped minimum wage, you are allowed to take up to $5.12 in credit, reducing your employee’s pay to $2.13 per hour. You can choose to pay more than $2.13 per hour and only take partial credit.
Click the tabs below to learn more tipped minimum wage laws:
The Department of Labor limits the amount of time a tipped employee can engage in non-tipped activities to 20% of the hours worked in their workweek, with continuous periods of no more than 30 minutes. Further, such activities must be in support of tip-related work, such as cleaning tables for waitstaff. For a longer time, they must be paid at full minimum wage at least.
Example: You employ a waiter at your restaurant. Typically this employee is waiting tables and serving food, but your host has called out of work and you need to fill the gap. You move the employee from waitstaff to host for the remainder of the evening (a period of three to four hours). During this timeframe, you are required to pay the employee at least the federal minimum wage (not tipped workers minimum wage) for the host work performed. Keep in mind that if your state has a higher minimum wage than the federal limit, you will be required to pay the higher wage.
Federal law requires you to provide a notice, either oral or written, informing your employees in advance of any tip credits you plan to take. A best practice is to create a written notice you can give during the new hire onboarding process. You should require that each employee sign the notice so that you have supporting documentation that they received a copy.
The tip credit notice should include the following:
- The hourly wage you are paying a tipped employee, which must be at least $2.13 per hour per federal law; the amount could be higher depending on the tipped minimum wage by state.
- The amount of the tip credit, which depends on your state’s tipped minimum wage rate and regular minimum wage rate.
- A statement explaining that the tip credit you claim cannot exceed the amount of tips actually received by the tipped employee.
- A statement detailing that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement; in addition, inform the employee that managers aren’t allowed to take control of their tips.
- A statement outlining that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.
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Note: You aren’t legally allowed to take your employees’ tips unless they request that you collect them for verification purposes. If that happens, you must return the tips in a timely manner.
Tip reporting requirements are another important component of complying with federal wage laws. You’re responsible for collecting payroll taxes on the tips as you would regular wages, so it’s important that your employees track and report to you all tips they directly receive from customers (usually cash tips).
When reporting tips, ensure that the total tip income your employees report each period is at least 8% of their total gross sales for the same period, or you may have to pay additional money for allocated tips. This is the IRS’ way of screening for unreported tip income. Please note income and FICA taxes are not withheld on these tips, and this requirement only applies to companies with more than 10 employees.
The following federal forms will help you with tip reporting:
| Form | How It Helps |
|---|---|
| Form 4070 | Allows your employees to report the monthly tips they receive to you. |
| Form 4070A | Gives employees a workbook to help track their daily tips. |
| Form 941 | Reports income, Social Security, and Medicare taxes withheld from your employees’ paychecks for payroll tax purposes. |
| Form 940* | Used to pay federal unemployment taxes (FUTA). |
| Form W-2** | Reports all income earned by the employee, as well as taxes. Includes all wages and tips earned throughout the year in addition to payroll taxes withheld and paid. |
| Form 8027 | Reports total sales and tips received during the year. |
*For help filling out Form 940 visit our guide: FUTA taxes & form 940 instructions.
**For help filling out Form W-2 visit our guide: How to fill out a W-2 form.
Pros & Cons of Paying Tipped Minimum Wage
In some cases, paying a tipped minimum wage helps employers save money while still allowing employees to receive a decent wage. In other cases, the employees receive the short end of the stick. Take time to consider the pros and cons of offering tipped wages to your employees. It works for some employers, but not as well for others.
| PROS | CONS |
|---|---|
| Less expense: When employers pay tipped wages versus regular wages, they can save money. | Time consuming: Tracking and reporting tips require additional time from employees and employers. |
| Additional tax credit: Employers who pay tipped wages may be entitled to a FICA tip credit at tax time. This is a credit for taxes paid on tips received that were over the minimum wage requirement. | Employees may feel resentful: Some employees may be upset that back-of-house employees, like cooks and dishwashers, receive higher pay while tipped employees only receive the minimum wage. |
| Better service: Workers may be more motivated to provide exceptional service since the majority of their income could potentially come directly from tips. | Error prone: Because you have to rely on calculations and employee honesty for accurate tip reporting, errors are more likely to occur. This can lead to unexpected taxes, back pay, and potential jail time. |
Tipped Minimum Wage Frequently Asked Questions (FAQs)
What is a tip?
A tip is a gratuity, usually in cash, given by a customer to a service worker for work performed (such as a waitress or hospitality worker). The gratuity can be any denomination to qualify as a tip.
What are the qualifications of a tipped employee?
Any employee who works in an occupation where they regularly receive more than $30 in tips monthly. Such occupations include restaurant waitstaff, hotel bellhops, bartenders, delivery drivers, and other individuals who receive tips for their services.
What is the lowest minimum wage for tipped employees?
Tipped employees must make a minimum of $2.13 per hour plus tips. This is the federal tipped minimum wage requirement. In addition, wages plus tips must equal the federal regular minimum wage of $7.25 per hour, unless your state has a higher minimum wage in place.
Bottom Line
It’s important for employers with tipped employees, especially restaurateurs, to check the minimum wage for tipped employees by individual states before setting hourly wage amounts. The laws vary—some states don’t require the standard minimum wage—and any violations can result in the employer paying back wages and penalties.
