Tipped Minimum Wage 2027: Cash Wage Rules by State
Short answer: In 2027 the minimum cash wage for tipped workers is $12.69 in Colorado, $7.85 in Maine, $6.61 in New Jersey, $6.15 in South Dakota and $5.70 in Ohio. Washington and Montana allow no tip credit, so tipped workers there must be paid the full minimum wage before tips.
2027 tipped rules in the states we confirmed
| State | 2027 rule | Source |
|---|---|---|
| Colorado | $12.69 per hour cash wage minimum | Colorado CDLE press release |
| New Jersey | $6.61 minimum cash wage; maximum tip credit $9.87 | NJDOL press release |
| Maine | $7.85 minimum direct wage; maximum tip credit $7.85 | Maine DOL |
| South Dakota | $6.15 per hour | South Dakota DLR |
| Ohio | $5.70 per hour | Ohio Department of Commerce |
| Arizona | $12.65 per hour ($3.00 tip credit) — secondary source, see state page | Industrial Commission of Arizona (poster) |
| Virginia | Federal $2.13 cash wage allowed only if tips reach the $13.75 state minimum | Virginia DOLI fact sheet |
| Montana | No tip credit allowed: tipped workers get the full $11.20 before tips | Montana DLI |
| Washington | No tip credit: tips and service charges cannot count toward the $17.73 minimum | WA L&I |
How a tip credit works
In states that allow it, an employer can pay a tipped employee a lower cash wage and count tips toward the difference up to the full minimum wage. The employer must keep records and make up any shortfall. Virginia's fact sheet gives the federal baseline: the tipped minimum cash wage under the Fair Labor Standards Act is $2.13 an hour, but if tips don't bring a worker to the Virginia minimum, the employer pays the difference.
Example: Colorado
Colorado's 2027 minimum is $15.71 and the tipped cash wage is $12.69, a gap of $3.02 an hour that tips must cover. A server who works 30 hours a week receives $12.69 × 30 = $380.70 in cash wages before tips; if tips for the week are less than $3.02 × 30 = $90.60, the employer must make up the shortfall to $15.71 an hour.
Federal tax treatment is a separate question
The tipped minimum wage is a labor law rule. The federal "no tax on tips" deduction is a tax rule: it lets workers in IRS-listed occupations deduct up to $25,000 of qualified tips, but tips remain subject to payroll taxes. Use the tips calculator and the tipped occupations list.
Many states and cities have tipped rules we have not verified here, and local minimums (Seattle, Denver, Minneapolis and others) can be higher than the state's. Confirm with your labor department.
Frequently asked questions
What is the tipped minimum wage?
It is the minimum cash wage an employer must pay a tipped employee before tips, when state law allows a tip credit. If the cash wage plus tips doesn't reach the full state minimum wage, the employer must pay the difference.
Which states do not allow a tip credit?
Of the states checked here, Montana and Washington do not. Montana's Department of Labor says no tip credit, meal credit or training wage is allowed, and Washington L&I says businesses may not use tips and service charges as part of the hourly minimum wage.
What is the tipped minimum wage in Colorado in 2027?
Colorado's agency announced a $12.69 tipped minimum wage for 2027, alongside the $15.71 standard minimum wage.
What is the tipped minimum wage in New Jersey in 2027?
New Jersey's minimum cash wage for tipped workers rises to $6.61 an hour from $6.05, and the maximum tip credit stays at $9.87.
Is tipped income also tax-free?
No. A federal deduction for qualified tips can reduce federal income tax by up to $25,000 for tax years 2025 through 2028, but tips are still subject to Social Security and Medicare tax and the deduction does not change what a state requires employers to pay. See the no-tax-on-tips calculator.
Where do I confirm my state's tipped rate?
Use the state labor department link in the table for each state. If your state is not listed, this site has not confirmed its 2027 tipped rate; check your state agency.
Sources and citations
Every dollar figure on this page was checked against the official pages below on November 14, 2026. If an agency updates its guidance, the agency page controls.
- Colorado: Colorado CDLE press release
- New Jersey: NJDOL press release
- Maine: Maine DOL
- South Dakota: South Dakota DLR
- Ohio: Ohio Department of Commerce
- Arizona: Industrial Commission of Arizona (poster)
- Virginia: Virginia DOLI fact sheet
- Montana: Montana DLI
- Washington: WA L&I
- U.S. Department of Labor: State Minimum Wage Laws (updated Nov. 5, 2026)
- IRS Fact Sheet FS-2025-03: Working Families Tax Cuts — Tax deductions for working Americans and seniors