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

• The federal tipped minimum wage is still $2.13 per hour in 2026. The federal minimum wage is still $7.25, so the maximum federal tip credit is still $5.12.
• The federal rules only work if the employee is a tipped employee under the FLSA, you give the required tip-credit notice, and cash wages plus tips reach at least $7.25 for each workweek.
• Overtime still starts from the full minimum wage, not the $2.13 cash wage. Federally, that means $7.25 x 1.5 - $5.12 = $5.76 in direct cash wages for each overtime hour.
• The federal 80/20/30 rule is not the governing federal standard in 2026. The current federal posture is the older dual-jobs framework.
• 2026 payroll now overlaps directly with tax reporting: qualified tips, qualified overtime, and Treasury Tipped Occupation Codes all feed your W-2 process.

If you searched "federal tipped minimum wage 2026," here is the direct answer: the federal cash wage is $2.13 per hour, the federal minimum wage floor is $7.25 per hour, and the maximum federal tip credit is $5.12 per hour.

Those figures come from the FLSA framework summarized in DOL Fact Sheet #15 and the IRS tip-reporting guidance in Topic No. 761. If your state or city requires a higher cash wage, that higher rule wins. For a state-specific comparison, start with our tip credit states guide or compare Florida with Texas.

Under federal law, you are in tipped-employee territory when a worker customarily and regularly receives more than $30 a month in tips. That is the threshold that opens the door to the tip credit.

The tip credit is not automatic. Before you take it, you need to tell the employee:

• the cash wage you will pay
• the additional amount you will claim as a tip credit
• that the credit cannot exceed the tips actually received
• that the employee keeps all tips except for a valid tip pool
• that you cannot take the credit at all if the notice is not given

That notice point is where a lot of employers get hurt. If you skip it, the federal tip credit can collapse from day one. This is one of the reasons our compliance checklist pairs wage rules with documentation checks instead of just quoting the $2.13 number.

The federal tip credit math is simple on paper and unforgiving in payroll.

Two rules matter operationally:

Shortfall rule. If tips are weak in a workweek, you make up the difference. You do not get to average across the month.

Overtime rule. You start from the full minimum wage, not from $2.13. If you want the worked examples and common traps, use our full overtime calculation guide for tipped employees.

This is also where the federal baseline starts to split from state law. In Texas, the federal numbers still drive the cash wage. In Florida, the cash wage is much higher and 2026 has two separate wage periods.

The 2021 federal 80/20/30 framework is not the rule employers are working under in 2026. The federal baseline is the older dual-jobs concept: related duties can still sit inside the tipped occupation, but a truly separate non-tipped job cannot ride on the tip credit.

That matters because employers often confuse side work and service charges at the same time:

• rolling silverware, wiping the bar, or stocking server stations can still fit inside a tipped role
• a separate janitorial or prep role should be tracked and paid as its own non-tipped job
• mandatory service charges and auto-gratuities are wages, not tips
• amounts distributed from service charges do not become qualified tips just because you paid them to staff

If your POS mixes service charges with voluntary tips, you create a double problem: bad minimum-wage support for the tip credit and bad tax data for Code TP. Our auto-gratuity vs. voluntary tip guide and tip qualifier tool are built for exactly that cleanup step.

Federal tipped wage rules used to live mostly in wage-and-hour land. In 2026, they also live in year-end reporting.

Under the IRS 2026 instructions, tipped employers now have to think about:

• Box 12 Code TP for qualified tips
• Box 12 Code TT for qualified overtime compensation
• Box 14b for the employee's Treasury Tipped Occupation Code
• employee monthly tip reports when cash tips reach $20 or more
• Form 8027 and allocated tips for large food or beverage establishments

That is why the federal tipped wage article cannot stop at $2.13 and walk away. If you want the tax-side checklist, read no tax on tips: what employers need to do in 2026, the full 2026 W-2 reporting guide, and our TTOC explainer on Treasury Tipped Occupation Codes.

Step 1: Confirm whether federal law is your controlling floor. If a state or city gives employees a higher wage, higher cash wage, or stricter side-work rule, that higher rule wins.

Step 2: Deliver and document the tip-credit notice. Treat this as an onboarding control, not a verbal reminder.

Step 3: Separate voluntary tips from service charges at the POS level. That protects both your wage calculations and your W-2 output.

Step 4: Run a weekly shortfall check. Do not wait until month-end to see whether tips covered the gap.

Step 5: Track overtime from the full minimum wage and isolate the premium portion for Code TT.

Step 6: Assign TTOCs before year-end and test your payroll export. If Box 14b is not configured before Q4, you are already late.

Step 7: Review whether Form 8027 or allocated-tip rules apply to your establishment.

A server works 46 hours in a week at a location that follows the federal baseline. You pay the federal $2.13 cash wage, the employee reports enough voluntary tips to support the credit, and no state rule overrides the federal floor.

The rest of the support up to the full minimum wage and overtime obligation has to come from valid reported tips. If those tips are weak, the employer makes up the shortfall in that same workweek. The same record set then feeds Code TP and Code TT reporting and the employee's TTOC assignment at year-end.

Skipping the tip-credit notice. If the notice is missing, the federal credit can disappear entirely.

Averaging weak-tip periods over a month. The make-up obligation is workweek by workweek, not month by month.

Paying overtime from the $2.13 cash wage. Federal overtime starts from the full $7.25 floor and then subtracts the same $5.12 credit.

Treating service charges as tip-credit-eligible tips. Mandatory charges are wages, not tips, and they also do not belong in Code TP.

Assuming the tax deduction changed payroll withholding. It did not. Reported tips are still subject to FICA and regular payroll controls.

Waiting until year-end to assign TTOCs or test W-2 exports. By then you are debugging tax reporting on a deadline instead of inside payroll setup.

What is the federal tipped minimum wage in 2026? The federal tipped minimum wage is $2.13 per hour. With the maximum federal tip credit of $5.12, the employee still has to reach $7.25 per hour for the workweek.

What is the maximum federal tip credit in 2026? It is $5.12 per hour, which is the difference between the $7.25 federal minimum wage and the $2.13 federal cash wage for tipped employees.

Do employers have to make up the difference if tips are low? Yes. If cash wages plus tips do not reach the required minimum wage for a workweek, the employer must pay the shortfall.

How is overtime calculated for a tipped employee under federal law? Start with $7.25, multiply by 1.5, and then subtract the $5.12 tip credit. That produces a $5.76 overtime cash wage under the federal baseline.

Is the federal 80/20 rule still in effect in 2026? No. The federal 80/20/30 framework is not the controlling federal rule in 2026. Employers are working under the dual-jobs concept instead.

What are TTOCs and where do they show up? Treasury Tipped Occupation Codes are the IRS occupation codes for tipped workers, and in 2026 they show up on the W-2 in Box 14b.

Run through TipFort's free compliance checklist to verify notice delivery, shortfall testing, overtime setup, and W-2 readiness before your next filing deadline.

If you still need to sort voluntary tips from service charges or confirm roles before year-end, use the tip qualifier and TTOC finder.