Tip Credit Rules by State
This page is a reference table of tipped cash wages and tip-credit rules across the 50 states and the District of Columbia. It is not tax, legal, or payroll advice. State tip-credit rules are wage-and-hour law. The FICA tip credit on Form 8846 is a separate federal income-tax credit. State rules affect only the cash wage you pay (and therefore the cash-wage number you enter when you figure Line 2 of Form 8846). They do not change the federal $5.15 floor used for the credit itself.
How State Tip Credit Rules Affect Form 8846
Under federal labor law an employer may pay a tipped employee a cash wage as low as $2.13 an hour and count tips toward the $7.25 federal minimum. Many states raise that cash floor or ban the tip credit entirely. The higher the cash wage you actually pay, the smaller (or zero) the exclusion on Form 8846 Line 2, and the larger the potential FICA tip credit. See the $5.15 rule explainer for why the federal floor never moves.
The 50-State Table
Figures reflect the U.S. Department of Labor tipped-employee table effective July 1, 2026, cross-checked against state labor-department announcements available as of October 2026. Local ordinances can be higher. Always confirm the rate that applies to your location and industry before setting payroll.
| State | Tipped minimum cash wage (2026) | Tip credit allowed | Notes |
|---|---|---|---|
| Alabama | $2.13 | Yes | Federal floor |
| Alaska | $14.00 | No | Full state minimum before tips |
| Arizona | $12.15 | Yes | Combined minimum $15.15 |
| Arkansas | $2.63 | Yes | Combined minimum $11.00 |
| California | $16.90 | No | Full state minimum; local/industry rates may be higher |
| Colorado | $12.14 | Yes | Combined minimum $15.16 |
| Connecticut | $6.38 (hotel/restaurant); $8.23 (bartenders) | Yes | Industry-specific cash wages |
| Delaware | $2.23 | Yes | Combined minimum $15.00 |
| District of Columbia | $10.30 | Yes | Combined minimum $18.40 |
| Florida | $11.98 | Yes | Post-Sept 30, 2026 increase; combined $15.00 |
| Georgia | $2.13 | Yes | Federal floor for most covered employers |
| Hawaii | $14.75 | Conditional | Tip credit allowed only if wages + tips clear minimum + $7.00 |
| Idaho | $3.35 | Yes | Combined minimum $7.25 |
| Illinois | $9.00 | Yes | 40% of applicable minimum |
| Indiana | $2.13 | Yes | Federal floor |
| Iowa | $4.35 | Yes | 40% of applicable minimum |
| Kansas | $2.13 | Yes | Federal floor |
| Kentucky | $2.13 | Yes | Federal floor |
| Louisiana | $2.13 | Yes | Federal floor |
| Maine | $7.55 | Yes | 50% of applicable minimum |
| Maryland | $3.63 | Yes | Combined minimum $15.00 |
| Massachusetts | $6.75 | Yes | Combined minimum $15.00 |
| Michigan | $5.49 | Yes | 40% of applicable minimum, per 2026 schedule |
| Minnesota | $11.41 | No | Full state minimum; local rates may be higher |
| Mississippi | $2.13 | Yes | Federal floor |
| Missouri | $7.50 | Yes | 50% of applicable minimum |
| Montana | $10.85 | No | Full state minimum for most employers; limited small-business exception |
| Nebraska | $2.13 | Yes | Combined minimum $15.00 |
| Nevada | $12.00 | No | Full state minimum |
| New Hampshire | $3.27 | Yes | Combined minimum $7.25 |
| New Jersey | $6.05 | Yes | Combined minimum $15.92 |
| New Mexico | $3.00 | Yes | Combined minimum $12.00 |
| New York | Varies by region and industry | Yes (hospitality) | NYC / Long Island / Westchester and rest-of-state rates differ; non-hospitality often full minimum |
| North Carolina | $2.13 | Yes | Federal floor |
| North Dakota | $4.86 | Yes | Combined minimum $7.25 |
| Ohio | $5.50 | Yes | Combined minimum $11.00 |
| Oklahoma | $2.13 | Yes | Federal floor |
| Oregon | $15.55 (standard); $16.80 (Portland metro); $14.55 (nonurban) | No | Full regional minimum; rates change July 1 |
| Pennsylvania | $2.83 | Yes | Combined minimum $7.25 |
| Rhode Island | $3.89 | Yes | Combined minimum $16.00 |
| South Carolina | $2.13 | Yes | Federal floor |
| South Dakota | $5.93 | Yes | Combined minimum $11.85 |
| Tennessee | $2.13 | Yes | Federal floor |
| Texas | $2.13 | Yes | Federal floor |
| Utah | $2.13 | Yes | Federal floor |
| Vermont | $7.21 | Yes | Combined minimum $14.42 |
| Virginia | $2.13 | Yes | Combined minimum $12.77 |
| Washington | $17.13 | No | Full state minimum; local rates may be higher |
| West Virginia | $2.62 | Yes | Combined minimum $8.75 |
| Wisconsin | $2.33 | Yes | Combined minimum $7.25 |
| Wyoming | $2.13 | Yes | Federal floor |
Source baseline: U.S. DOL Wage and Hour Division, Minimum Wages for Tipped Employees, effective July 1, 2026, plus state announcements through October 2026.
The Most Complex States
California bans the tip credit. Employers pay the full state minimum ($16.90 in 2026) before tips. Local and industry rates (fast food, health care) can be higher. Because cash wages already exceed $5.15, Form 8846 Line 2 is normally zero.
New York sets different cash wages by region and by industry. Hospitality rates differ between New York City / Long Island / Westchester and the rest of the state; many non-hospitality tipped occupations must receive the full minimum. Confirm the exact schedule that applies to your establishment.
Alaska, Oregon, Washington, Minnesota, Montana, and Nevada also prohibit the tip credit. Cash wages equal the full applicable state (or regional) minimum. Oregon's three regional rates change every July 1.
Several other states index their rates annually or have pending legislation. Always re-check the current notice before the start of a new calendar year.
States With No Tip Credit
Seven states require the full applicable minimum wage in cash before tips:
- Alaska
- California
- Minnesota
- Montana
- Nevada
- Oregon
- Washington
In these states the cash wage already exceeds the federal $5.15 floor used on Form 8846. Line 2 is typically zero, so nearly all reported tips become creditable and the FICA tip credit is larger than it would be under a low cash-wage regime.
How to Use This Table With the Calculator
- Find your state (and region, if applicable) in the table above and note the tipped cash wage that applies to your employees.
- Gather each tipped employee's reported tips, hours worked, and actual cash wages paid for the period you are calculating.
- Enter those figures in the Form 8846 calculator. The cash-wage amount you enter drives the Line 2 exclusion; the $5.15 federal floor stays fixed.
FAQ
My state has no tip credit. Do I still qualify for the FICA tip credit?
Yes. The two rules are independent. A state that bans the wage-law tip credit simply forces a higher cash wage. That higher cash wage usually produces a larger Form 8846 credit because fewer (or zero) tips are excluded on Line 2.
Does a local minimum wage override the state tipped cash wage?
Often yes. Many cities and counties set higher floors. Use the higher of the state and local rate that applies to your location.
Where do I find the official DOL table?
The U.S. Department of Labor publishes the national summary at dol.gov under "Minimum Wages for Tipped Employees." State labor departments publish the controlling local notices.
Do these cash wages change the $5.15 figure on Form 8846?
No. The $5.15 floor is fixed by IRC §45B. State cash wages only change the number you subtract when you compute the exclusion. See the $5.15 rule page.
Restaurant operators can continue on the restaurant tip credit page. Salon owners should first confirm eligibility on the salon tip credit page.
Last updated: October 2026