Methodology: Tip Credit Calculator

What this calculator gives you

This tool estimates whether a tipped employee’s cash wages plus tips reach the full minimum wage for one workweek, and whether the cash wage meets the jurisdiction’s cash floor.

You pick a state (or the federal FLSA default), enter the cash wage you pay, tips received for the week, and hours worked. The result shows:

• Make-up owed if cash + tips fall short of the full minimum wage
• Tip credit claimed per hour (capped at the legal maximum, or $0 where tip credit is banned)
• Cash-floor shortfall if you are paying below the required cash wage

It does not rebuild the vacated 80/20/30 side-work stopwatch. That Final Rule is gone from federal regulation; this page models cash floors and weekly make-up only.

The basic method

For a workweek:

tips per hour = tips received ÷ hours worked
tip credit claimed per hour = lesser of (jurisdiction max tip credit, tips per hour)
  — or $0 if the state prohibits a tip credit

weekly full-MW obligation = full minimum wage × hours
weekly cash paid = cash wage × hours
make-up owed = max(0, weekly full-MW obligation − weekly cash paid − tips received)

The make-up test uses tips actually received, not the maximum tip credit alone. A slow week still requires a make-up check even when the cash wage sits at the legal cash floor.

Separately, the calculator flags a cash-floor violation when cash wage is below the jurisdiction’s minimum cash wage for tip-credited employees (or below the full state minimum wage in no-tip-credit states).

Federal floor

Under the FLSA tip-credit provision:

• Full federal minimum wage: $7.25/hour
• Minimum cash wage when taking a tip credit: $2.13/hour
• Maximum federal tip credit: $5.12/hour ($7.25 − $2.13)

Only tips actually received count. Compulsory service charges are not tips. Before claiming a tip credit, federal law also requires specific notice to the employee; missing notice can forfeit the credit for the noncompliant period. This calculator does not audit notice.

Worked examples

No-tip-credit states

Seven states ban the tip credit: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. In those states the calculator:

• Sets maximum tip credit to $0
• Sets the cash floor equal to the full state minimum wage
• Still runs the weekly make-up test (usually zero if you pay full cash MW)

You can select those states on purpose — multi-state operators often need to see the cash-floor jump when a server works a California shift.

What is modeled

• Federal FLSA cash floor and tip-credit maximum
• State cash floors and tip-credit caps from the DOL WHD tipped-wage table (July 1, 2026 revision)
• All 50 states + District of Columbia + federal default
• Weekly make-up to the full minimum wage
• Cash-floor shortfall detection
• No-tip-credit states with tip credit forced to $0

What is not modeled

• 80/20/30 side-work tracking. The 2021 Dual Jobs Final Rule is vacated; dual-job occupation splits remain a legal concept but are not minute-tracked here.
• Tip-pool validity. Traditional vs nontraditional pools and manager-in-pool violations are compliance questions outside cash-floor math.
• Required tip-credit notice. Five federal disclosure elements (and any stricter state notice) are not audited by the form.
• Overtime. Tipped overtime uses the full minimum wage (or higher regular rate), not $2.13 alone.
• Local ordinances that raise the cash floor above the state rate.
• Full regional / occupation grids for New York, Connecticut, Oregon, and similar special structures — the tool uses a documented default rate and names the nuance in the state note.
• Hawaii’s “$7 above MW” condition beyond displaying the published cash/$1.25 credit pair — confirm the conditional rule before relying on a tip credit there.
• Tax treatment of tips (including the federal income-tax deduction for qualified tips). That is a Form 1040 issue, not a cash-wage floor.

When this gets re-reviewed

Recheck when DOL republishes the tipped-wage table, a modeled state changes its cash floor or tip-credit cap, or federal law changes the $2.13 cash floor or $7.25 minimum wage.

State cash floors move more often than the federal floor. Refresh after January 1 rate changes and mid-year indexed increases (Florida’s scheduled climb is one example).

Data sources

• 29 USC §203(m), §203(t) — tip credit and tipped-employee definition
• 29 CFR Part 531 Subpart D — tipped-employee regulations
• DOL Fact Sheet #15 — cash wage, make-up, notice, pooling
• DOL Minimum Wages for Tipped Employees — July 1, 2026 state table
• Restaurant Law Center v. U.S. Department of Labor, 120 F.4th 163 (5th Cir. 2024) — vacatur of the 80/20/30 Final Rule

Companion guide: Tip Credit and the 80/20 Rule by State. Primary research: Tipped wage and tip credit.

How accurate is this?

For a single-state, single-occupation tipped worker with known cash wage, hours, and tips, this is a practical payroll check. It is strongest when the jurisdiction uses a simple cash-floor / tip-credit pair from the DOL table.

It is an estimate, not a wage determination. Confirm regional hospitality rates, local ordinances, occupation-specific cash wages, dual-job splits, overtime, tip pools, and notice before changing payroll.