Federal Tipped Minimum Wage 2026: $2.13 Cash Wage, $5.12 Tip Credit, and W-2 Rules

• The federal figures remain $7.25 minimum wage, at least $2.13 direct tipped wage, and up to $5.12 tip credit.
• A higher state or local rule can change the amount you must pay.
• Eligibility, notice, shortfall checks, and valid tip pooling are conditions of the credit.
• The employer tip credit under wage law is different from the employee's federal tip deduction.

These amounts come from the DOL tipped-employee guidance. The $2.13 figure is conditional, not a standalone wage standard for anyone whose job occasionally receives tips. Compare the applicable state and local rules using the state guide.

The FLSA tipped-employee definition concerns a worker who customarily and regularly receives more than $30 per month in tips. The employer must inform the employee of the direct wage, the credit claimed, the limit based on tips actually received, and tip-retention and valid-pool conditions, including that the credit cannot apply without the required information.

Document delivery as part of payroll onboarding. Keep the notice and pool policy where the payroll reviewer can find them. A wage field in software is not evidence that the employee received the required notice.

For 30 straight-time hours, the federal wage floor is $217.50. A $2.13 hourly direct wage supplies $63.90. If supporting tips are only $100, the employer must supply another $53.60. Do not offset a deficient workweek with excess tips from another week.

For overtime at a $7.25 regular rate, the exact ordinary cash overtime rate is ($7.25 × 1.5) − $5.12 = $5.755 before rounding. Required bonuses and service-charge wages can increase the regular rate. Follow the overtime examples for the full calculation.

The current federal dual-jobs framework should not be described as the vacated 2021 80/20/30-minute rule. DOL restored its earlier regulation in December 2024. Work in a separate non-tipped occupation and stricter state requirements still matter; see the DOL tip-regulation page.

Mandatory service charges are not tips. When paid to employees, they are wages and may count toward wage obligations, but they are not customer tips supporting a tip credit. They generally also belong in the overtime regular-rate analysis. Keep them separate at the POS-to-payroll handoff.

The qualified-tip deduction does not remove the wage floor or let the employer stop payroll taxes. Record cash tips, the occupation in which they were received, and qualified overtime premiums for 2026 W-2 reporting.

Avoid confusing three concepts: the wage-law tip credit, the employee income-tax deduction, and the employer Section 45B tax credit. They have different rules and serve different purposes.

• Confirm the controlling location and rate.
• Check eligibility and notice records.
• Reconcile tip-pool participation and employee allocations.
• Identify shortfalls for the workweek and any more protective state period.
• Calculate the regular rate and overtime premium.
• Reconcile tip reports and payroll totals.
• Review a sample W-2 preview before the provider's cutoff.

For a focused example, read the Texas guide. For a higher cash wage with a fixed credit, read the Florida guide.

Is $2.13 the minimum wage for every tipped worker?

No. It is the federal minimum direct wage only when a valid federal tip credit applies. State or local law may require a higher wage or prohibit the credit.

Can the employer keep tips above the minimum wage?

No. Employees retain their tips except for a valid tip-sharing arrangement. Managers and supervisors cannot receive employee tip-pool distributions.

Does a W-2 tip total prove the tip credit was valid?

No. A year-end total cannot establish every workweek's minimum wage, notice, pooling, or role requirements. Keep the underlying payroll records.

Select one tipped employee and confirm their work location, notice, pool participation, hours, and actual tips. Verify the shortfall and overtime calculations before approving payroll. A saved $2.13 rate tells you very little without those supporting records.

The tip-pooling recordkeeping guide explains how to document transfers without confusing them with new customer tips. Tell TipFort where your record preparation gets difficult if you want to discuss early access. Keep wage-law review and payroll processing with the people responsible for those decisions.