Work · Your first weeks on the job

Tips and tipped pay

Under federal law your employer can pay as little as $2.13 an hour if tips bring you to at least $7.25 every week; if they don't, the employer must make up the difference. Your tips are yours: managers can't take a cut. Many states pay more, and you report tips of $20 or more a month.

Easy15 minFreeChecked October 3, 2026

You'll need

Your pay stubs
A daily record of your tips: a notes app works
Your state's tipped wage, from the Labor Department table

What to know

Know the federal floor. A tipped employee regularly gets more than $30 a month in tips. The employer must pay at least $2.13 an hour in cash wages and can count up to $5.12 of your tips toward the $7.25 minimum wage. Source: DOL¹
Check the weekly math. Your cash wage plus tips has to reach at least $7.25 an hour each workweek. If it doesn't, the employer must make up the difference on payday. Source: DOL¹
Look up your state. When state law is more protective, the employer has to follow it. Source: DOL¹ Alaska, California, Minnesota, Montana (for businesses with more than $110,000 a year in sales), Nevada, Oregon and Washington require the full state minimum wage before tips, and many others require more than $2.13; see the DOL's state table. Source: DOL²
Know who can share your tips. Managers and supervisors can't keep any part of your tips, even through a tip pool. If you're paid less than $7.25 an hour in cash, a required tip pool can include only workers who normally get tips, like servers, bussers and bartenders, not cooks or dishwashers. Source: DOL¹
Check card tips. Your employer may take out only what the card company actually charges, for example 3%, and must pay you the tip by the regular payday. Source: DOL¹
Keep a daily tip record and report it. If you get $20 or more in tips in a month at one job, give your employer a report by the 10th of the next month. Source: IRS³ Under $20? You don't report it to the employer, but it's still income on your tax return. Source: IRS⁴

Watch out A mandatory service charge, like 15% added to the bill, isn't a tip under federal law, and the business can use it toward your wages. Source: DOL¹ Also, when an employer takes the tip credit, deductions for walkouts, breakage or register shortages are illegal if they push you below minimum wage. Source: DOL¹

A slow week, worked out

	Amount
30 hours at $2.13 cash wage	$63.90
Tips that week	$90.00
Total	$153.90
Required: 30 × $7.25	$217.50
Employer must add	$63.60

Federal minimums only; your state may require more. Rule from the DOL. Source: DOL¹

Asking your manager about tips

Hi, can you show me how my hourly rate and tips add up for last week? I want to make sure I hit minimum wage, and I'd like to know how the tip pool is split.

A daily tip record

Date: ___ | Shift: ___ | Cash tips: $___ | Card tips: $___ | Tipped out to others: $___ (to whom: ___)

See it done

Video by PBS NewsHour National TV news

Rethinking wages for tipped workers

Watch on YouTube: Rethinking wages for tipped workers

2016 · Checked October 3, 2026

Heads up: this PBS NewsHour story from 2016 is about the debate over tipped wages, not a how-to. The $2.13 federal rule it describes is still the same today.

Video won't load at school or work? No problem. Everything you need is in the steps; the video's just a bonus. Watch it on YouTube later.

If it doesn't work

Manager taking from the tip jar, or a slow week left you under $7.25 an hour? Write down dates and amounts, then call the Wage and Hour Division at 1-866-487-9243. Source: DOL¹ or file a complaint Source: DOL⁶
Never told about the tip credit? Your employer must tell you, before taking it, your cash wage, the credit amount and that you keep your tips. An employer that doesn't give that notice can't take the tip credit. Source: DOL¹
Didn't report tips? Not reporting them to your employer can bring a penalty of 50% of the Social Security and Medicare tax you owe on them. Source: IRS³ Start your daily record now.

Good to know

The details, if you want them. Tap a line to open it.

The new tips deduction

Workers in jobs that customarily get tips may be able to deduct qualified tips, up to $25,000 a year, with a phase-out above $150,000 of income ($300,000 joint). Source: IRS⁵ Tips are still generally subject to Social Security and Medicare tax. Source: IRS

Dual jobs

If you work two different jobs for the same employer, like hotel maintenance and serving, the tip credit applies only to your hours as a server. Source: DOL¹

Take it with you

Printable card Download card (PDF)

Sources

U.S. Department of Labor Fact Sheet #15: Tipped employees under the FLSA
U.S. Department of Labor Minimum wages for tipped employees, by state
Internal Revenue Service Publication 531, Reporting tip income
Internal Revenue Service Topic 761, Tips: withholding and reporting
Internal Revenue Service How to take advantage of no tax on tips and overtime
U.S. Department of Labor Filing a complaint

Lesson W4.3 · Last checked October 3, 2026 against the sources listed.

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