CashoutTipped minimum wage / Iowa
Iowa tipped minimum wage
What employers must pay
In Iowa, the minimum wage is $7.25 an hour. An employer can pay a tipped employee as little as $4.35 an hour in cash, as long as tips bring the total to at least $7.25. The difference, $2.90, is the tip credit.
The tip credit, up to 40 percent of the minimum wage, is allowed only for restaurant, hotel, motel, inn and cabin workers. Iowa's lower $6.35 new-hire rate and its exemption for small businesses apply only to employers not covered by federal wage law; everyone else gets at least $7.25.
Who counts as a tipped employee: more than $30 a month in tips.
If your cash wage plus tips comes up short of $7.25 an hour in a workweek, your employer has to make up the difference.
What changes next
No change to the Iowa minimum wage is scheduled. Iowa's rate matches the federal minimum, so it changes only if Congress changes it.
Tip pooling and service charges
Iowa has no tip pooling rule of its own, so federal law applies: when a tip credit is taken a mandatory pool may include only employees who customarily and regularly receive tips (servers, bartenders, bussers), not cooks or dishwashers; back of house may share only if the employer pays the full minimum wage. Employers, managers and supervisors may never keep any part of employees' tips.
Overtime
No state overtime law; federal rules apply: time and a half after 40 hours in a workweek, no daily overtime. For tipped workers overtime is 1.5 times the full $7.25 minus the $2.90 tip credit, so at least $7.98 an hour in cash.
Taxes on your tips
Iowa taxes wage income, and tips are wages, so its income tax applies to your tips. Federal income tax, Social Security and Medicare still apply. The federal tip deduction can cut the income tax part: see how the No Tax on Tips deduction works.
Check a week's pay
Enter one workweek to see whether your cash wage plus tips reached Iowa's minimum of $7.25 an hour.
You reached the minimum this week.
You came up short. Your employer owes you at least
If you are underpaid
Start by comparing your pay stubs with your own record of hours and tips. If the numbers don't add up, you can file a complaint with the Iowa Department of Inspections, Appeals, and Licensing, Wage and Child Labor Unit: how to file. You can also call the U.S. Department of Labor, Wage and Hour Division, at 1-866-487-9243.
