TL;DR: The federal tipped minimum wage is a $2.13/hr cash wage — unchanged since 1991 — made legal by the FLSA tip credit: your employer counts up to $5.12/hr of your tips toward the $7.25 federal minimum. If tips don't get you to $7.25 for the workweek, your employer must pay the difference. But federal is just the floor: as of July 1, 2026 (U.S. DOL), 16 states still use $2.13, 7 states require the full state minimum wage before tips, and everyone else sits somewhere in between. Your real protection is arithmetic — which means keeping your own record of hours and tips.
General information, not legal advice. State rules summarized from the U.S. DOL Wage and Hour Division tipped-wage table, last revised July 1, 2026.
Where $2.13 comes from
Under the Fair Labor Standards Act, a tipped employee is someone who customarily and regularly receives more than $30/month in tips. For those workers, federal law allows a two-part wage:
| Piece | Federal amount |
|---|---|
| Cash wage your employer must pay | $2.13/hr |
| Maximum tip credit the employer may claim | $5.12/hr |
| Total that must be reached with tips | $7.25/hr (federal minimum wage) |
The tip credit is the employer counting your tips toward their minimum-wage obligation. Two conditions make it legal:
- Notice — the employer must inform you before using the tip credit (the cash wage, the credit amount, that tips beyond the credit are yours, and that the credit can't exceed tips actually received).
- The math must work — cash wage + tips ≥ minimum wage for the workweek. When it doesn't, the employer owes the shortfall. A slow week is the employer's problem, not yours — but only if you can show the numbers.
The map: three kinds of states
State law overrides the federal floor whenever it's more generous. As of July 1, 2026:
① The $2.13 states (16). Alabama, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia, and Wyoming follow the federal $2.13 cash wage with a $5.12 tip credit.
② The full-wage states (7). Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington don't allow a tip credit at all — the employer pays the full state minimum wage (California's is $16.90) and your tips stack on top.
③ Everyone else. Higher-than-federal cash wages with smaller tip credits — for example Arizona requires a $12.15 cash wage against a $15.15 minimum. Look up your state on the full 50-state table.
The rules that protect your tips
Beyond the wage math, the FLSA draws hard lines:
- Tips belong to you. Employers, managers, and supervisors can't keep any part of employee tips — even where no tip credit is taken.
- Tip pooling is allowed, with limits. Pools among customarily tipped coworkers are legal. If the employer pays the full minimum wage (no tip credit), the pool may also include back-of-house — but never managers.
- Credit card fees. Where an employer takes the processing fee out of card tips, the deduction can't cut you below minimum wage — and several states prohibit it entirely (state pages note this).
- Overtime is computed on the full minimum wage, not on $2.13. Time-and-a-half math starts from at least $7.25, minus the tip credit.
Why this only works if you keep records
Every protection above collapses into one question: what did you actually make per hour? The employer's payroll shows the $2.13; only your own record shows the tips-per-shift that decide whether you were topped up correctly, whether the tip pool was clean, and what your real hourly came to.
- Compute your true rate with the tips-to-hourly calculator.
- See what leaves your check with the tip-out calculator.
- Or let TipScan read your checkout slip each shift — cash, card, tip-out, and real hourly, logged in 3 seconds, exportable when you need to show the math.
Related reading: How to keep a tip log the IRS will accept · Tip-out rules explained · No Tax on Tips 2026 guide