Tipped Minimum Wage by State: Complete Guide for Employers (2026)

Giving tips for certain jobs like servers and bartenders is standard in the United States. These workers are considered tipped workers, which allows employers to pay them less than the federal minimum wage.

In this tipped minimum wage guide for 2026, we’ll cover:

• The most important information regarding wages for tipped employees in the US
• Minimum wages for tipped employees across US states
• Frequently asked questions about tipped minimum wage by state

*Note: State laws and regulations for tipped minimum wages have been checked and updated for 2026. 

General information about tipped minimum wages in the US

Before listing minimum tipped wages by state, we’ll cover:

• Who qualifies as a tipped employee
• What qualifies as a tip
• How tipped wages work
• What’s the federal minimum wage for tipped employees

Who qualifies as a tipped employee?

The US Department of Labor (DOL) defines tipped employees as those who regularly receive more than $30 in tips per month while working. However, many states define tipped employees based on other specific criteria. Check your state laws to determine whether someone qualifies as a tipped employee.

Some examples of tipped employees include:

• Bartenders 
• Waiters/Waitresses
• Delivery drivers
• Hairstylists
• Other service industry positions

What is the waiter/waitress minimum wage by state?

Although most states have universal minimum wages, Connecticut, New York, and the Virgin Islands divide hospitality workers into multiple tiers.

Tipped minimum wage rates change annually in some states. Clockify by CAKE.com is a timekeeping software with adjustable rates that makes implementing these changes hassle-free.

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What qualifies as a tip?

According to the Internal Revenue Service (IRS), tips are optional or extra payments that customers give to employees as a token of appreciation for their services. The IRS further classifies tips as:

• Tips received through electronic payment (credit card, debit card, etc.)
• Cash tips
• Tips received from other employees (tip pools, tip splitting, or other tip-sharing agreements)
• Non-cash tips (such as concert tickets or lottery tickets)

How do tipped wages work?

In the United States, a tipped wage is the money the employer pays to employees who receive a significant portion of their pay from tips. 

The US Department of Labor states that an employer is only required to pay a tipped employee $2.13 per hour in direct wages if the employee earns at least the federal minimum wage combined with tips.

In other words, if an employee makes a total of $7.25 per hour or more, you are allowed to pay them the tipped federal minimum of $2.13. This is because the tips cover the amount needed to meet the federal minimum wage.

Note that some states have stricter minimum wage laws that overrule federal law.

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What is tip pooling?

Tip pooling is a form of tip distribution that collects all employee tips into one lump sum (most commonly, a jar). Afterward, tips are divided (mostly equally, but not always) among the tipped employees.

Tips can be split based on the hours worked, or a point system that determines the percentage of the tip pool someone receives. These points are distributed to all workers who helped during that shift.

As an employer, you can require workers to participate in tip pooling. However, according to the Code of Federal Regulations (CFR): 

1. You must notify your employees.
2. You can’t retain any tips for other purposes.

To implement tip pooling legally, you’ll need to create an official tip pooling policy with information on:

• Whether the tip pooling is mandatory or voluntary
• Which employees must participate
• How much must each employee contribute to the “pool”
• How you divide the tips

In practice, tip pooling can prove to be quite tricky when it comes to financial audits and employee turnover.

Sports bar owner and our expert contributor Angela Jones states that the trickiest administrative burden is tracking tip pooling accurately enough to survive an audit. She also shared first-hand advice on reducing turnover in hospitality:

“Build more predictable revenue streams alongside tipped income — things like trivia nights, poker events, and live music that drive consistent midweek traffic. When tipped employees see steadier, higher-volume nights rather than feast-or-famine shifts, the wage floor becomes far less of a flashpoint for staff turnover.”

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What is the federal minimum wage for tipped employees?

The federal minimum wage for tipped employees is $2.13 per hour. However, with their tips combined, tipped employees must earn at least $7.25 per hour in total.

This is calculated on a weekly basis and can’t be averaged out for a period longer than one workweek. If a person ever makes less than $7.25 per hour during their workweek, the employer must pay the difference.

What is a tip credit?

A tip credit is an arrangement that lets employers pay tipped workers a lower hourly wage. This approach relies on customer tips to make up the rest of the federal minimum wage.

When paying a tipped employee, you can deduct the tips and pay out less than the federal minimum wage ($7.25 per hour). The lowest federal rate you must pay regardless of tips is $2.13 per hour. This amount is also called the minimum cash wage.

The dollar difference between the minimum cash wage (often $2.13) and the federal or state minimum wage (often $7.25) is called a tip credit — what you save by relying on tips. For most US states, $5.12 is the highest tip credit amount. On the other hand, some state laws propose higher amounts both for minimum wages and tip credit.

Note: Tip credit must be calculated based on a fixed, 7-day workweek, and can’t be averaged across a 2-week pay period.

Tip credits are strictly enforced by the DOL, and accidental underpaying can result in back wages, penalties, and even class action lawsuits. Before you can claim tip credit, you have to clearly notify all tipped employees of how you claim tip credit. The notice can be verbal or written.

You need to clearly communicate these 5 things to ensure your tip credit policy is legal:

1. The exact direct cash wage you’ll pay tipped workers
2. The exact tip credit amount you are claiming
3. That the tip credit you claim will never exceed the actual amount of tips they receive
4. That the employee gets to keep all their tips (except for valid tip-pooling arrangements)
5. That the tip credit won’t apply unless this notice has been given to them

If you do all of this, you are legally acting as a tip-credit employer.

Federal minimum wage example calculation

Let’s assume a server named Lucy works in a state that follows federal tip credit laws. Lucy made $50 in tips during a 30-hour workweek. Can her employer claim full tip credit?

$2.13 x 30 hours = $63.9 (tipped minimum wage for 30 hours)

$63.9 (30-hour tipped minimum) + $50 in tips = $113.9 (Lucy’s total wages for the week)

Here’s the minimum amount Lucy should have earned for the 30-hour week, according to federal law:

$7.25 (hourly minimum wage) x 30 hours = $217.5 (30-hour federal minimum wage)

We can clearly see that Lucy made less than the federal minimum of $7.25 per hour required by the Fair Labor Standards Act (FLSA). Her weekly tips didn’t cover the federal minimum wage.

Because federal law mandates that the employer must compensate the employee for the difference, in this case, here’s what the employer must pay:

$217.5 (federal minimum for 30 hours of work) – $50 (what Lucy made in tips) = $167.5

In this case, Lucy’s employer needs to pay her $167.5 for the 30-hour workweek. Divided by the hour, this would be a $ 5.58-per-hour direct payment. Her $50 in tips equates to $1.67 per hour (for the 30-hour week). Combined with the direct wages the employer must pay, $5.58 + $1.67 equals $7.25 per hour — which hits the federal minimum.

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How to calculate overtime for tipped employees?

The first thing to do when calculating overtime pay is to check your state overtime laws.

The basic legally required overtime formula for tipped employees is:

(Full minimum wage × 1.5) − Applicable tip credit = Overtime cash wage

If the calculation ever feels wrong or complicated, it’s usually because the worker falls into one of these 3 exceptions:

Daily overtime vs. weekly overtime

Federal law only triggers overtime when a worker physically works more than 40 hours in a 7-day week. But state laws can override this with strict daily limits.

In states like California, overtime rates kick in after 8 hours in a single day. In Colorado, they kick in after 12 hours in a single day.

A worker could work a single 14-hour shift on Saturday and then take the entire week off (totaling only 14 hours for the week). However, you still have to pay the person overtime for the hours worked past the daily threshold.

Dual job with multiple rates

If an employee works two different jobs in the same restaurant at different pay rates, you have to calculate a “blended rate.” This is a weighted average of both jobs for the entire week. The 1.5 calculation must be based on that blended number.

Mandatory service charges aren’t tips

If a restaurant automatically adds a 20% gratuity fee, the IRS and DOL view that money as a bonus or commission paid by the restaurant.

When that service charge is paid out to the server, it artificially increases their regular rate of pay for the week. The employer must recalculate the overtime rate based on the higher number — making overtime more expensive.

The easiest way to handle overtime is to implement a time tracking system like Clockify. This way, you catch every overtime hour in real time and tie it to a specific employee and workday.

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2026 tipped minimum wage changes

2026 has brought significant changes for tipped workers and business owners.

Let’s take a look at the most notable tipped minimum wage changes in 2026.

Our expert contributor Lisa Stroeder, a licensed Ontario paralegal, states that the continually decreasing tip credit represents one of the biggest shifts in 2026:

“Numerous jurisdictions have tried to either eliminate tip credit or raise the amount of basic wage that companies are required to pay before tips are introduced. This sets a mathematical dilemma for small businesses that are already working on razor-thin margins.”

New York City minimum wage increased to $17 per hour

Effective January 1, 2026, New York City’s minimum wage is $17.00/ hour.

For tipped food service workers, employers have to pay at least $11.35 in cash wages. The maximum tip credit employers can claim in NYC is $5.65.

Washington, D.C. minimum wage increased to $18.40 per hour

On July 1, 2026, Washington, D.C.’s minimum wage was increased to $18.40 per hour. The base cash wage for tipped employees will increase to $10.30 per hour.

Tip credit has been removed from 7 states

As of 2026, 7 states have completely prohibited employers from claiming tip credit. In these states, tips are treated strictly as additional income on top of the state’s full minimum wage.

In 2026, states with no tip credit are:

1. Alaska
2. California
3. Minnesota
4. Montana
5. Nevada
6. Oregon
7. Washington

In states like California and Washington, standard minimum wages are now climbing to $17+ per hour. Because there’s no tip credit, restaurant owners now have to pay the full rate out of pocket. This has led to a massive rise in mandatory “service charges” on restaurant checks, introduced to account for rising labor costs.

Chicago slowed down tip credit elimination

In 2023, the city of Chicago passed the One Fair Wage ordinance that should gradually phase out the tip credit entirely by 2028. The first scheduled reduction was set to take effect on July 1, 2026.

However, the Chicago City Council passed a compromise in May 2026 to pause the phaseout for 2 years. In short, Chicago made the following decisions:

• For employers with 21+ employees, the phaseout won’t resume until 2028. The full tip credit elimination is pushed to 2030.
• For employers with 4–20 employees, the tip credit will remain intact until 2030.  Full tip credit elimination is delayed until 2033.

The 80/20/30 rule changes

For years, the Department of Labor enforced the 80/20/30 rule that mandated that tip credit was applicable only to workers who worked 20% or less of the time on non-tipped tasks.

However, a recent ruling by the Fifth Circuit Court has overturned that rule. As a result, in 2026, this rule no longer applies in Texas, Louisiana, and Mississippi. Employers in those states have far more flexibility in assigning side work without losing the tip credit. Employers in other parts of the country are still navigating complex compliance risks.

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Tipped minimum wage by state for 2026

In this section, we’ll examine all state-individual tipped minimum wages for 2026.

States that require you to pay the full state minimum wage before tips

According to DOL Minimum Wages for Tipped Employees, these seven states require you to pay tipped employees the full state minimum wage before tips. In these states, the tipped worker minimum wage and the standard minimum wage are the same.

*The rates for Oregon can vary slightly depending on whether the worker is in the Portland metro area or nonurban counties. Washington, D.C. is also phasing out its tip credit. Washington, D.C.’s tip credit will fully match its standard minimum wage in 2027.

States with the tipped minimum wage above the federal tipped minimum wage

According to the DOL, 29 states require employers to pay wages above the federal tipped minimum wage ($2.13 per hour). The states mentioned in the previous chapter also fall into this category.

*Exceptions and additional rules:

Connecticut

The minimum wage is adjusted annually, based on a formula.

District of Columbia

Employers have to pay a minimum cash wage of at least 56% of the standard minimum wage. Only the remaining difference can be claimed as tip credit.

Florida

The minimum wage is scheduled to increase by $1.00 every year on September 30, until it reaches $15.00 on September 30, 2026.

Hawaii 

Tip Credit in Hawaii is only allowed if the combined wage + tip amount is at least $7.00 more than the applicable minimum wage.

Michigan

The minimum direct cash wage for tipped employees in Michigan is scheduled to increase each year, until reaching 50% of the state minimum wage in 2031. The minimum wage is also scheduled to increase on January 1, 2027 (to $15.00 per hour). After this, it will be adjusted annually based on a formula.

New Jersey

The minimum wage for employers with fewer than 6 people and seasonal employees is $15.23 per hour. Additionally, tip credit is allowed only if you inform your tipped employees in advance about:

• Exact cash wage they’ll be paid
• Amount of tip credit you’ll claim
• The fact that you retain all tips, unless you have a valid tip pool
• Other relevant New Jersey regulations

Ohio

If your gross annual sales are less than $405,000, the state minimum wage for your employees is $7.25 per hour. 

Oklahoma

If you employ up to 10 full-time employees and have $100,000 or less in gross annual sales, the minimum rate for workers is $2.00 per hour.

If you employ 10 or more full-time employees, or your annual gross sales are $100,000+, you can claim up to $3.62 per hour in tip credit. Oklahoma’s law doesn’t allow tip credit for workers who are subject to the FLSA.

Wisconsin

Wisconsin recognizes opportunity employees. This is an employee under 20 years old, whom you haven’t employed for more than 90 days. The minimum wage for opportunity employees is $5.90 per hour. But if this person is also a tipped worker, you can pay them $2.13 in cash wages and claim tip credit. Still, their total earnings must add up to $5.90.

West Virginia

The state minimum wage law applies only to state agencies and employers with 6 or more workers.

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States with the same tipped minimum wage as the federal tipped minimum wage

In the following states, the state minimum tipped wage is the same as that required under the federal Fair Labor Standards Act ($2.13 per hour):

*Exceptions and additional information: 

Alabama, Louisiana, Mississippi, South Carolina, and Tennessee

These states do not have state minimum wage laws. The FLSA guarantees the $2.13 federal minimum wage.

Georgia 

Georgia has a state minimum wage law, but it doesn’t apply to tipped employees. The federal minimum wage applies.

Kansas, Texas, and Utah

These excluded states do not cover any employment that is subject to the federal FLSA.

North Carolina

Tip credit is only permitted under strict conditions. The employer needs to:

• Notify all employees in advance how much they’ll be paid in cash.
• Tell all employees the amount that wages will be increased using the tip credit.
• Obtain a signed certification of the tip amount received for each pay period (week or month), for each tipped employee.

Wyoming

Wyoming’s minimum wage is $5.15 per hour. However, employers must pay employees covered by the FLSA at least the federal minimum wage, which is $7.25.

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Tipped minimum wage for inhabited US territories

Minimum wage regulations for 5 inhabited US territories in the Caribbean and the US Pacific Islands region are presented in the table below.

*Additional information:

American Samoa

American Samoa sets industry-specific minimum wage rates. Additionally, hourly wages increase $0.40 every three years, on September 30. They’ll continue to rise until all of the minimum wage rates equal the federal minimum wage. The next increase is scheduled for 2027.

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Track earnings for tipped employees — with Clockify by CAKE.com

Keeping up with ever-changing labor laws is challenging and can lead to payroll mistakes. But a powerful time tracker like Clockify makes timekeeping and frequent rate changes as simple as it gets.

#1: Keep accurate hours for each person

Clockify easily handles time tracking for employees with frequently changing hours and shifts. Add people, assign them to projects, and choose your preferred timekeeping method:

• Kiosk mode to track daily employee attendance
• Manual mode to track hours manually
• Timesheet view to enter weekly attendance and hours worked

Clockify calculates the exact amount owed based on the employee rate. This way, you know exactly what you owe at the end of the week. 

#2: Update employee rates to ensure labor law compliance

Some US states frequently change their minimum wage rates. Clockify helps you implement rate changes with peace of mind. Clockify has 5 levels of rates that are easy to change at any time. 

Changing Clockify rates keeps your historical rates intact, if you choose. Updated rates apply from the date you specify.

#3: Track daily or weekly tips with Clockify’s Expenses

Track tips for each person’s shift with Clockify’s Expenses. At the end of their shift, your employees can enter their tips, or their share of the tip pool in the Expenses category. 

At the end of the week, go to Reports > Expense report. Select your desired week and individuals to see their tracked tips.

#4: Export hours for easier payroll

Collect payroll-ready data with ease. Clockify allows you to export time tracking data as a CSV file. And, if your accountant uses a dedicated payroll software like Xero or ADP, their programs will read Clockify data even more easily.

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FAQs about tipped wages by state

To learn more about the subject, let’s examine some of the frequently asked questions about tipped minimum wage by state.

Do waiters get paid less than the minimum wage?

The federal minimum wage is $7.25 an hour; paying employees less than this is illegal. However, if a waiter makes the minimum wage or more purely through tips, an employer can pay them at a lower rate. The total wage + tip earnings still have to add up to at least $7.25 per hour for each workweek.

Why do servers only make $2.13 an hour?

Servers only make $2.13 per hour in direct wages because the money they earn through tips often exceeds the federal minimum wage — $7.25 per hour. If a server earns less during any workweek, the employer must pay the difference.

The minimum cash rate of $2.13 was established in 1996 to help small diners survive. It has remained permanently frozen since.

Today, some states require higher minimum cash wages. Other states are gradually eliminating this employer perk completely.

What is tip credit against minimum wage?

In some US states, the “tip credit against the minimum wage” rule allows employers to rely on tips to pay people. Regardless of tips, federal law still requires a minimum cash payment of $2.13 per hour. Some state laws have higher rates, while others allow no tip credit at all.

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Which states allow tip credit?

The Department of Labor (DOL) lists the following states as the states where tip credit is allowed:

*Specific individual state rules apply.

The US territories that allow tip credit are:

• American Samoa
• Commonwealth of the Northern Mariana Islands
• Puerto Rico
• The US Virgin Islands

Which states don’t allow tip credit?

Although the majority of states allow tip credit, these are the states where tip credit isn’t allowed:

• Alaska
• California
• Minnesota
• Montana
• Nevada
• Oregon
• Washington

Also, Guam is a US territory that doesn’t allow tip credit.

What are the states that use the federal tipped minimum wage?

Certain states follow the federal rate of $2.13 per hour for tipped minimum wage. 

In other words, the tipped minimum wage payment in the following states is the same as the one required under the federal Fair Labor Standards Act ($2.13 per hour):

• Alabama
• Georgia
• Indiana
• Kansas
• Kentucky
• Louisiana
• Mississippi
• Nebraska
• North Carolina
• South Carolina
• Tennessee
• Texas
• Utah
• Virginia
• Wyoming

The US territories that use the federal tipped minimum wage are:

• American Samoa
• Commonwealth of the Northern Mariana Islands
• Puerto Rico

What are the states that have their own tipped minimum wages?

Most states have their own tipped minimum wages. These states require employers to pay tipped employees a minimum cash wage higher than the $2.13 minimum cash wage required under the FLSA:

How much do most servers make a shift?

The latest US Bureau of Labor Statistics numbers report a mean hourly wage of $19.26 for servers in 2025.

However, the server’s earnings depend on several factors, like:

• Location and popularity of the workplace — Servers in major US cities with plenty of visitors usually earn more.
• Type of shift servers work — A busy weekend night often provides more tip opportunities.
• Server’s skill level — A more experienced server will likely earn more in tips than a beginner. 

What is the lowest tipped minimum wage?

The lowest a tipped employee can be paid is $2.13 per hour. Nonetheless, tipped employees must receive the federal minimum of $7.25 when wages and tips combine. 

State wage laws overrule federal laws, so your state may have a much higher minimum wage and tipped minimum wage. You may also be required to pay a full minimum wage regardless of tips, depending on your state.

What is the highest tipped minimum wage?

The state with the highest tipped minimum wage in the US is Washington — $17.13 per hour. Other states with high hourly tipped minimum wages are:

• Arizona — $12.15
• Colorado — $12.14
• District of Columbia — $10.30
• Florida — $10.98
• Hawaii — $14.75

Furthermore, the following states/territories have eliminated tip credit:

• Alaska
• California
• Guam
• Minnesota
• Montana
• Nevada
• Oregon 
• Washington

These states also have a higher minimum wage than $7.25 per hour (for FLSA covered businesses).

Do tips get taxed?

Tips are considered income and are subject to federal income tax. Every employee is responsible for reporting their tips to their employer.

The amount the employer withholds from paychecks is based on the worker’s total wages plus tips. Because of this, employees must report all cash and non-cash tips.

The tips that must be reported include:

• Cash tips from customers
• Charged tips (credit/debit card charges) given to the employee by their employer
• Tips received from a tip-sharing agreement

What is the tipped minimum wage in NY?

According to the New York State DOL, the minimum wage rates depend on the region and worker classification.

New York City, Long Island, and Westchester

• Service employees: $14.15 tipped minimum wage, $2.85 maximum tip credit.
• Food and service workers: $11.35 tipped minimum wage, $5.65 maximum tip credit.

The rest of New York State

• Service employees: $13.30 tipped minimum wage, $2.70 maximum tip credit.
• Food and service workers: $10.70 tipped minimum wage, $5.30 maximum tip credit.

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What is the minimum wage for waiters and waitresses in Florida?

As of September 30, 2025, the minimum wage in Florida sits at $14.00 an hour, according to the Florida Restaurant & Lodging Association (FRLA). The required cash wage for tipped employees is $9.98.

The minimum wage will increase to $16.00 an hour in 2027. The cash wages for tipped employees will rise to $12.98.

What is the minimum wage for waiters and waitresses in Texas?

In Texas, the minimum wage for waiters and waitresses is $7.25 per hour.

$2.13 per hour is the lowest cash wage an employer can pay — if the employee’s weekly tips + cash wage add up to at least $7.25 per hour. If this isn’t the case, the employer must pay the difference.

What is the minimum wage for waiters and waitresses in California?

As of January 1, 2026, California’s state minimum wage for waiters and waitresses is $16.90 per hour. The state of California doesn’t allow tip credit.

However, many cities and counties in California (like San Francisco, Los Angeles, and West Hollywood) have their own local minimum wages. Employers are legally required to pay whichever rate is highest.

Also, workers employed at “limited-service” fast-food restaurants with 60+ locations have a $20.00 hourly minimum wage.

What is the minimum wage for waiters and waitresses in Arizona?

In Arizona, the total minimum wage for waiters, waitresses, and other tipped employees in 2026 is $15.15 per hour.

Arizona standard minimum wage is $15.15 per hour. The maximum tip credit amount is  $3.00 per hour. The minimum cash wage to pay regardless of tips is $12.15 per hour. 

What is the minimum wage for waiters and waitresses in Colorado?

If a restaurant is located in a part of Colorado without a local wage law, the total minimum wage is $15.16 per hour. The maximum tip credit is $3.02 per hour, and the minimum amount to pay regardless of tips is $12.14 per hour.

Let’s take a look at the wages for specific cities in Colorado:

Conclusion/Disclaimer

Rules regarding tipped wages in the US depend on where you’re working. To be fully informed of all your rights as a tipped employee, be sure to check:

• Federal and state laws for tipped wages
• State laws on tip credit
• IRS taxation regulations for tips

For more detailed information, check out the links we’ve provided, as most of them lead you to the official government websites with other relevant information.

Please note that this guide was written in Q3 of 2026, so any changes in the labor laws introduced later may not be included in this guide. 

This guide offers a general overview of information and does not constitute legal advice. Before taking legal action, consult the appropriate institutions and/or authorized representatives. 

Clockify isn’t responsible for any losses or risks incurred should this guide be used without further guidance from legal or tax advisors.