Tip Income
How to Use This Tip Income Calculator
This calculator computes the real effective hourly rate of a tipped worker — server, bartender, driver, or hairstylist — by combining base wage, average tips, and tip-out or tip-pool deductions.
How It’s Calculated
Effective Hourly Rate = (Base Wage × Hours + Total Tips − Tip-Out) / Hours Worked
Tip-outs to support staff and tip pooling are what separate the tips you receive from the pay you actually keep.
Example
A server earning $2.13 per hour base (the US tipped minimum) plus $180 in tips over a six-hour shift, minus $20 tipped out to support staff, nets an effective rate of roughly $36.80 per hour for that shift.
Frequently Asked Questions
Is tip income taxable?
Yes — in both the US and Canada, tips are taxable income and are legally required to be reported, whether received in cash or via card.
What is a tip credit?
In the US, many states let employers pay a reduced tipped minimum wage as long as tips bring total pay up to at least the standard minimum wage. If not, the employer must make up the difference.
How does tip pooling affect my real earnings?
Tip pools redistribute a portion of tips among staff such as kitchen and bussers, which can meaningfully lower a server or bartender’s take relative to the tips they personally received.