Tipped Minimum Wage by State: 2026 Guide for Employers

How Tipped Wages Work (With Examples)

Here's how the math works in practice. Lucy is a restaurant server in a state that follows the federal rules. You pay her $2.13 an hour, and she works 30 hours this week and earns $120 in tips.

If Lucy had earned $160 in tips instead, her total would be $223.90. That's above $217.50, so you wouldn't owe anything extra.

Example in a State With a Higher Cash Wage

Marco is a server in Florida. Since September 30, 2026, Florida's minimum wage is $15.00 and the lowest tipped cash wage is $11.98. He works 30 hours and earns $60 in tips.

Overtime for Tipped Employees

Overtime for a tipped employee is based on the full minimum wage. You also can't take a bigger tip credit for overtime hours than for regular hours. Here's a federal example for a server who works 45 hours in a week.

Rounding up to the next cent keeps you on the safe side. For more on overtime math, see our guide on how to calculate overtime pay rates.

Tipped Minimum Wage by State for 2026

The tables below show the 2026 state rates as of October 2026. Federal law lets states set a higher minimum wage, and when they do, you pay the higher rate. Some cities and counties also set their own minimum wages, so check your local rate too.

States That Pay Full Minimum Wage (No Tip Credit)

In these states, tipped employees must earn the full state minimum wage in cash. Tips are extra and can't count toward base pay.

Alaska's rate was $13.00 from January 1 to June 30, 2026. In Montana, a business that isn't covered by the FLSA and has $110,000 or less in yearly gross sales may pay $4.00 an hour, but any employee covered by the FLSA gets at least the higher state or federal rate.

States That Allow a Tip Credit With a Cash Wage Above $2.13

These states allow a tip credit, but the cash wage is higher than the federal $2.13. Even with a tip credit, cash wages plus tips must reach the full minimum wage in the last column.

A few rows need extra context:

• Florida's rates rose on September 30, 2026. Before that date, the cash wage was $10.98 and the full minimum wage was $14.00.
• Hawaii allows the tip credit only when the employee's wages plus tips are at least $7.00 more than the state minimum wage.
• Ohio employers with less than $405,000 in yearly gross receipts follow the $7.25 federal minimum wage.
• West Virginia's minimum wage law covers employers with six or more employees.
• New York's tip credit depends on the job type and region, and it doesn't apply on days when a tipped worker spends more than two hours, or 20% of the shift, on non-tipped work.
• DC's rates rose on July 1, 2026. The tipped cash wage is 56% of the minimum wage and stays at that level until July 1, 2028, when it rises to 60%. A 2025 DC law replaced the faster phase-out that voters approved in Initiative 82.
• Michigan's tipped cash wage is rising in steps under a 2025 law until it reaches 50% of the state minimum wage in 2031.

States That Use the Federal $2.13 Cash Wage

These states allow the federal $2.13 cash wage. In most of them, total pay must reach at least $7.25 an hour. Nebraska and Virginia have higher state minimum wages, so the tip credit is bigger there.

Alabama, Louisiana, Mississippi, South Carolina and Tennessee don't have a state minimum wage law, so the federal rules apply. Georgia's law doesn't cover tipped employees. Kansas, Oklahoma, Texas and Utah exclude jobs covered by the FLSA from their state minimum wage laws, and Wyoming employers covered by the FLSA must pay the federal minimum.

States With Their Own Tipped Employee Definition

Federal law treats a worker as a tipped employee once they customarily and regularly get more than $30 a month in tips. These states use a different amount.

Tipped Wage Changes Coming in 2027

Tipped Wage Laws by Role

Not every job that gets tips qualifies for a tipped wage. Under federal law, a worker has to customarily and regularly get more than $30 a month in tips, and some states set a higher amount. Here's how the rules usually apply to common roles:

• Servers and waitstaff: Usually qualify, along with bussers and, in some cases, hosts who share in a tip pool.
• Bartenders: Almost always qualify, especially when they serve customers directly.
• Delivery drivers: Qualify if they regularly get tips. Their pay still has to meet minimum wage after job costs like vehicle expenses.
• Hotel and casino staff: Valets, bellhops and some gaming floor positions often qualify, depending on how regularly they get tips.
• Salon and spa workers: Hair stylists, nail techs and massage therapists often qualify when tips are a regular part of their pay.

If one person works two different jobs for you, the tip credit only applies to the tipped job. For example, a hotel maintenance worker who also serves in the restaurant can't be paid a tipped wage for the maintenance hours. Side tasks that are part of the tipped job, like a server setting tables, don't change their tipped status.

Federal Tip Credit Rules and the Required Notice

The tip credit lets you count part of an employee's tips toward the minimum wage. Under federal rules, you can pay as little as $2.13 an hour in cash as long as tips bring total pay up to at least $7.25 an hour.

Before you take a tip credit, you must tell each tipped employee:

• The cash wage you'll pay them, which must be at least $2.13 an hour.
• The amount of the tip credit you'll claim, which can't be more than $5.12 an hour.
• That the tip credit can't be more than the tips they actually get.
• That they keep all their tips, except in a valid tip pool limited to employees who customarily and regularly get tips.
• That you can't take the tip credit unless you've told them these rules.

Federal law allows the notice to be oral or written. A written notice that each employee signs is easier to prove later. Some states require more, such as signed monthly or per-pay-period tip certifications in North Carolina and advance notice of the cash wage and tip credit in New Jersey.

You also need records showing that cash wages plus tips meet the minimum wage. Learn more in our guide to employee time tracking compliance.

Credit Card Tips and Service Charges

When a customer tips by card, you can subtract the card company's processing fee from the tip, but no more than that fee. You still have to pay the tip by the regular payday, even if the card company hasn't paid you yet. Some states may not allow the fee deduction at all.

A required service charge, like an automatic 18% on large parties, isn't a tip under federal law. If you pass it to employees, it counts as wages and goes into their regular rate for overtime.

Tip Pooling Rules Under Federal Law

A tip pool is when employees put their tips together and share them. Federal law allows tip pools, but who can be in the pool depends on whether you take a tip credit.

• If you take a tip credit, only employees who customarily and regularly get tips, such as servers, bartenders and bussers, can share in the pool.
• If you pay every employee at least $7.25 an hour in cash and take no tip credit, cooks, dishwashers and other back-of-house staff can share in the pool too.
• Managers and supervisors can't get any money from a tip pool. They can keep tips a customer gives them directly for service they provided directly and alone. Owners who hold at least 20% of the business and actively manage it follow the same rule.
• The business can't keep any part of employees' tips for any reason.

You have to pay out all pooled tips by the regular payday for that workweek. Many states add their own tip pool rules, so put your policy in writing and check state rules before you start or change a pool.

Taxes on Tips and the No Tax on Tips Deduction

Tips are taxable income. Employees report their tips to you, often on IRS Form 4070, and reported tips show up on their Form W-2 as Social Security tips. You withhold income tax, Social Security and Medicare on reported tips just as you do on wages.

The One Big Beautiful Bill Act created a new federal income tax deduction for qualified tips. Here's what you should know:

• Employees can deduct up to $25,000 of qualified tips a year for tax years 2025 through 2028.
• The deduction phases out when modified adjusted gross income is over $150,000 ($300,000 for married couples filing jointly).
• Tips must be voluntary, set by the customer and not open to negotiation. A required service charge doesn't count.
• The job must be one that customarily and regularly got tips on or before December 31, 2024. The Treasury Department proposed a list of these jobs in September 2025.
• Married employees have to file jointly to claim it, and they need a valid Social Security number.

Common Tipped Wage Mistakes to Avoid

Small mistakes with tipped pay can turn into back pay claims. These are the ones employers run into most often:

• Paying a tipped wage to the wrong employees. Under federal law, a worker has to customarily and regularly get more than $30 a month in tips to count as a tipped employee.
• Not covering shortfalls. If cash wages plus tips don't reach the minimum wage for the workweek, you have to pay the difference.
• Taking a tip credit for non-tipped work. Hours spent in a separate non-tipped job, like maintenance, need the full minimum wage.
• Skipping the tip credit notice. Without the required notice, you can't take the tip credit at all.
• Letting managers into the tip pool. Managers and supervisors can't take any share of pooled tips, whether or not you take a tip credit.
• Getting overtime wrong. Overtime for tipped employees is based on the full minimum wage, minus the same tip credit you use for regular hours.
• Missing mid-year rate changes. Alaska, DC, Florida and Oregon all changed rates after January 1 in 2026.
• Using one policy everywhere. Tip and wage rules vary by state and city, and what's allowed in one location may be illegal in another.
• Poor recordkeeping. Without clear records of hours, tips and pay, it's hard to show you followed the rules during an audit.

Bottom Line

Know your state's cash wage, give the tip credit notice in writing, keep managers out of the tip pool and check every workweek that cash wages plus tips reach the full minimum wage.

How TimeClick Helps

Paying tipped employees correctly takes clear records and accurate math. You need to see problems before they turn into payroll mistakes.

TimeClick keeps hours, tips and wage data together, so you can see how pay adds up for every employee and fix issues before payroll runs.

• Track hours, base wages and tips together in a single system
• Automatically flag wage shortfalls when tips don't meet minimum requirements
• Generate payroll-ready and audit-friendly reports with just a few clicks
• Filter and review data by job role, location or department for multi-state compliance
• Keep clean, organized records for audits and labor reviews

Whether you run one restaurant or several locations in different states, TimeClick helps you keep employee pay accurate and easy to back up.

Final Thoughts on Tipped Minimum Wage Laws

Tipped wage laws change from state to state and sometimes in the middle of the year. If you employ tipped workers, you're responsible for making sure every paycheck adds up.

Check your state's rate each January and July, give the tip credit notice, and keep good records of hours and tips. With TimeClick, you can automate time tracking, keep accurate records and spend less time fixing payroll issues.

Sources Used in This Guide

• U.S. Department of Labor: Minimum wages for tipped employees by state (revised July 1, 2026)
• U.S. Department of Labor: Fact Sheet 15, tipped employees under the FLSA
• U.S. Department of Labor: Overtime examples for tipped employees
• IRS news release IR-2025-114: Guidance on the tips and overtime deductions
• IRS Notice 2025-69: Qualified tips and overtime deductions
• DC Department of Employment Services: 2026 minimum wage poster
• D.C. Law 26-55: Fiscal Year 2026 Budget Support Act of 2025 (tipped wage schedule)
• Oregon Bureau of Labor and Industries: Minimum wage
• Alaska Department of Labor: Minimum wage increases
• New York State Department of Labor: Minimum wage for tipped workers
• New York State Department of Labor: Minimum wage
• California DIR news release 2026-66 (2027 minimum wage)
• Washington L&I: Minimum wage
• Colorado Division of Labor Standards and Statistics (2027 minimum wage announcement)
• Maine Department of Labor: 2027 minimum wage
• Montana Department of Labor and Industry: State minimum wage
• Ohio Department of Commerce: 2027 minimum wage poster
• Nevada Labor Commissioner: 2026 minimum wage bulletin

This guide gives general information only. For your situation, check with your state labor department or an employment attorney.