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Tipping concepts

Tipped Minimum Wage

Also called: tipped wage, subminimum wage

The minimum hourly direct wage that an employer must pay a tipped worker — federally $2.13, varies by state from $2.13 to full state minimum wage.

The tipped minimum wage is the lowest hourly rate an employer can pay a tipped employee in direct wages. Federal floor: $2.13/hr (unchanged since 1991). States can require higher.

The full minimum wage (the "tipped wage + tips must equal at least" target) varies by state too. In 2026:

  • Federal minimum: $7.25/hr (unchanged since 2009)
  • State minimums range from $7.25 (states that defer to federal) to $16+ (California, Washington, several others)

The gap between the tipped wage and full minimum is the "tip credit" the employer takes — and the amount tips must cover.

Seven states currently require employers to pay the full state minimum wage as direct pay to tipped workers, with tips on top:

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

State and local laws change frequently. A worker hired in a state with a low tipped wage may relocate to a higher-wage state and see direct pay multiply 6×. The IRS doesn't care — federal tax is federal — but state minimum wage law and labor enforcement matters considerably to take-home.