Tip Credit Calculator
Check whether weekly tips plus cash wage clear minimum wage, and how much the employer must add.
What it does
Tipped workers on the federal tip credit earn a lower cash wage, $2.13 an hour, with tips expected to carry the total to the full minimum wage of $7.25. The credit is the piece the employer is allowed to count from tips.
Each week is measured on its own: cash wages plus tips divided by hours. If the total clears the minimum, the credit holds. If it falls short, the employer owes the difference as a top up.
The tool shows the effective hourly rate, the credit actually used, the weekly gross, and whether the week meets the floor.
Many states set higher cash wages, higher minimums, or refuse the credit entirely, so treat the federal numbers here as the floor and check your state rules.
How to use
- Enter the minimum wage that applies to you; the federal default is $7.25.
- Enter the cash wage your employer pays per hour, $2.13 federally.
- Enter the tips you took home this week.
- Enter the hours worked in the same week.
- Read the effective hourly rate and the credit used.
- Read the status line: meets the minimum, or the exact amount the employer must add.
Formula
- min wage
- The applicable minimum, $7.25 federally.
- cash wage
- Direct hourly pay before tips, $2.13 federally.
- tips
- Tips received in the workweek.
- hours
- Hours worked in that week.
- credit
- Tips the employer may count toward the minimum, capped at $5.12 federally.
Federal numbers: $2.13 cash wage and a $7.25 minimum, so the credit tops out at $5.12 an hour. The employer only takes the credit tips actually cover, and owes the shortfall every week it appears. Many states set stricter floors, and overtime hours use a higher base with the credit applied on top.
Worked example
Example: $300 in tips over 40 hours
Minimum wage $7.25, cash wage $2.13, $300 in tips, 40 hours.
- Cash: 40 x 2.13 = $85.20.
- Total: 85.20 + 300 = $385.20.
- Effective rate: 385.20 / 40 = $9.63 per hour.
- Credit used: min(5.12, 300/40 = 7.50) = $5.12 per hour.
- The week clears the $7.25 floor, so no top up is owed.
- Tool shows $9.63 per hour, $5.12 per hour, $385.20, meets the minimum.
Reference table
| Tips | Effective rate | Credit used | Result |
|---|---|---|---|
| $90 | $4.38 | $2.25 | Employer adds $114.80 |
| $200 | $7.13 | $5.00 | Employer adds $4.80 |
| $290 | $9.38 | $5.12 | Meets the $7.25 minimum |
| $300 | $9.63 | $5.12 | Meets the $7.25 minimum |
Limits
- Federal default; states may require more, so check local rules.
- No overtime, tip pool, or multiple job math.
- Assumes all tips are reported.
- No tax withholding or credits are calculated.
Common mistakes
- Believing $2.13 is a legal wage everywhere; it is a floor with a top up duty.
- Averaging a slow week against a strong one; each workweek stands alone.
- Forgetting that when tips run short the employer must make up the difference.
- Entering monthly tips instead of the week.
- Ignoring state law, which often sets the real number.
Try it yourself
Quick checks. Answers sit tucked under each question.
$120 in tips over 35 hours at the federal floor?
Total $194.55 and an effective $5.56 an hour, so the employer adds $59.20.
$350 in tips over 45 hours?
Effective $9.91 an hour, credit $5.12, no top up needed.
$90 in tips over 40 hours?
Effective $4.38 an hour; the employer owes $114.80 for the week.
Questions
What is the tip credit?
The amount of the minimum wage an employer may cover with tips instead of cash wages, up to $5.12 an hour under federal rules.
Can I be paid just $2.13 an hour?
Only if tips bring your weekly total to at least $7.25 an hour. Short weeks trigger a top up from the employer.
What if my tips are terrible one week?
The employer pays the difference for that week. The guarantee is per workweek, not averaged across the month.
Do state rules change the math?
Often yes. Some states require higher cash wages or the full minimum before tips; enter your state's minimum in the tool.
Does overtime change the credit?
Overtime hours are paid at a higher premium with the credit applied on top under its own rules. This page covers regular hours.
Can my employer take my tips?
No. Tips belong to the worker except valid pool shares under the rules, and deductions cannot cut pay below the minimum.
Sources
- US Department of Labor: Fact Sheet 15, Tipped Employees Under the FLSA
- US Department of Labor: Minimum Wage
- US Department of Labor: State Minimum Wages for Tipped Employees