CashoutGlossary / Tipped employee
Tipped employee
Under federal law, a worker in a job where they customarily and regularly get more than $30 a month in tips, the group a tip credit can apply to.
Tipped employee is a legal category under the Fair Labor Standards Act: an employee in an occupation where they customarily and regularly receive more than $30 a month in tips. Only tips you actually receive count toward that test.
The label matters because an employer can pay the lower tipped cash wage, at least $2.13 an hour under federal law, only to tipped employees. If you work two jobs for the same employer, one tipped and one not, the tip credit applies only to your hours in the tipped job. Related duties inside a tipped job, like a server setting tables, don't make it a second job.
States set their own thresholds. Pennsylvania, for example, uses $135 a month. In Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington the label matters less, since tipped workers there get the full state minimum wage before tips. See your state on the tipped minimum wage pages.
The tax code uses a different test. For No Tax on Tips, what matters is whether your job is on the IRS list of occupations that customarily and regularly received tips on or before December 31, 2024, each with a Treasury Tipped Occupation Code. A common mistake is assuming one test answers the other. Being a tipped employee for wage law doesn't by itself make your tips qualified for the deduction.
Related terms
Tip credit · Tipped minimum wage · Treasury Tipped Occupation Code (TTOC) · Fair Labor Standards Act (FLSA) · Side work
