About the Tip Credit Calculator
This tip credit calculator checks whether a tipped employee’s cash wages plus tips reach the minimum wage for a workweek, as required by the Fair Labor Standards Act (FLSA) and state law. Choose the federal rule or a state, enter regular and overtime hours, the cash wage paid and the tips received, and it shows the tip credit the employer can claim, the overtime cash rate and any make-up pay the employer owes.
Restaurant owners, payroll managers and servers, bartenders and other tipped workers can use it to audit a paycheck. Under the FLSA an employer may pay as little as $2.13 an hour in cash and count up to $5.12 an hour of tips toward the $7.25 federal minimum wage, but only if tips actually cover the gap; otherwise the employer must make up the difference. Several states, including California, Washington, Alaska, Minnesota and Nevada, allow no tip credit at all.
Rules year: 2026. State presets use the U.S. Department of Labor’s table of minimum wages for tipped employees effective July 1, 2026, updated for Florida’s scheduled increase to $15.00 an hour ($11.98 cash wage) on September 30, 2026 under the Florida Constitution. Some states have different rates for small employers, specific industries or localities (for example New York, Oregon, Montana and Connecticut, which you can enter with the custom option), and rates often change on January 1. The calculation assumes the employee is paid by the hour with a regular rate equal to the minimum wage.
With the default inputs, the make-up pay owed by employer is $54.80. Change any value above to recalculate instantly.
How to use the tip credit calculator
- 1Choose the federal rule or your state, or enter custom rates.
- 2Enter regular hours and any overtime hours for one workweek.
- 3Enter the tips the employee actually kept that week.
- 4Turn off the toggle if the employer pays more or less than the minimum cash wage.
- 5Read the make-up pay owed and the overtime cash rate.
Formula and method
The tip credit per hour is the gap between the minimum wage and the cash wage the employer pays, capped at the jurisdiction’s maximum (minimum wage minus minimum cash wage; $7.25 − $2.13 = $5.12 under the FLSA). The employer can only claim tips the employee actually received, so the credit taken for the week is the smaller of tips and the hourly credit × hours worked.
For overtime, the DOL requires the calculation to start from the full minimum wage: the employee is owed 1.5 × minimum wage for each overtime hour, and the employer may subtract the same per-hour tip credit, giving a federal overtime cash rate of $10.875 − $5.12 = $5.755. Make-up pay is whatever is still needed to bring cash wages plus the credited tips up to the required total for the workweek.
- MW
- Applicable minimum wage per hour
- TC
- Tip credit per hour (MW − cash wage, capped)
- H
- Regular hours in the workweek
- OT
- Overtime hours over 40 in the workweek
Worked examples
Federal rules: 40 hours with $150 in tips
Forty hours at $7.25 requires $290. The employer pays $2.13 × 40 = $85.20 in cash and may credit up to $204.80 of tips, but the server only received $150, so the employer owes $290 − $85.20 − $150 = $54.80 in make-up pay.
Federal rules with 5 overtime hours and $400 in tips
Required pay is 40 × $7.25 + 5 × $10.875 = $344.38. Cash wages are $85.20 plus 5 × $5.755 = $113.98, and $230.40 of tips is credited (45 hours × $5.12). That covers the requirement, so no make-up pay is due; the worker earned about $514 including all tips.
Florida: 30 hours with $60 in tips
Florida’s $15.00 minimum wage (from September 30, 2026) requires $450 for 30 hours. The $11.98 cash wage pays $359.40 and the employer may credit up to $3.02 an hour ($90.60), but only $60 of tips came in, leaving $30.60 of make-up pay.
California: no tip credit allowed
California requires the full $16.90 minimum wage in cash, so 30 hours pays $507 and all $200 of tips is extra income, for $707 in total.
Frequently asked questions
What is the federal tipped minimum wage?+
Under the FLSA, employers may pay tipped employees a cash wage of at least $2.13 an hour and claim a tip credit of up to $5.12, as long as cash wages plus tips reach the $7.25 federal minimum wage for every workweek.
Who counts as a tipped employee?+
Under federal law, an employee who customarily and regularly receives more than $30 a month in tips. Several states set their own threshold, and some do not allow a tip credit at all.
What happens if tips do not cover the tip credit?+
The employer must make up the difference so that cash wages plus tips equal at least the minimum wage for the workweek. That top-up is the make-up pay this calculator shows.
How is overtime calculated for tipped employees?+
Overtime is based on the full minimum wage, not the cash wage. Federally that is 1.5 × $7.25 = $10.875 an hour, minus the same tip credit used for regular hours, so the cash rate is at least $5.755.
Which states do not allow a tip credit?+
According to the DOL table effective July 1, 2026, Alaska, California, Minnesota, Nevada, Oregon, Washington, Montana and Guam require the full minimum wage before tips, though Montana has a lower rate for some small businesses.
Must the employer tell workers about the tip credit?+
Yes. To claim a tip credit under the FLSA, the employer must first inform the employee of the cash wage, the tip credit amount, that the credit cannot exceed tips received, and that tips belong to the employee except for a valid tip pool.
Results are general estimates and not legal advice. Laws vary by jurisdiction — consult a qualified attorney.