Tipping in the United States is not governed by one universal rule, it shifts by industry, region, and the type of service you receive. A flat "always tip 20%" answer misses that a bartender, a hotel housekeeper, and a delivery driver are all tipped differently, and it skips the two things most tipping articles leave out: how tipped employees are legally paid, and how that tip income gets taxed. This guide covers both, along with a full breakdown by situation and a worked example using the same math as the tip calculator.
How much should you tip?
Tipping norms vary by setting, and the ranges below reflect general US etiquette rather than a single fixed rule. Use the low end for adequate service and the high end for excellent service, and adjust for local custom where it differs.
- Restaurants (sit-down): 15-20% of the pre-tax bill is the long-standing convention, and many etiquette guides now treat 18-20% as the more common baseline for good service, with 20%+ reserved for excellent service. Fine dining and large parties sometimes push higher.
- Food delivery: 15-20% of the order subtotal, or a flat minimum of about $3-5 for smaller orders, since the driver's effort does not scale down much just because the order is small.
- Coffee shops and counter service: optional. A small flat amount (50 cents to a couple of dollars) or simply rounding up the total is common when a tip jar or digital prompt is offered, but no one expects a full percentage tip for a counter order.
- Bars: roughly $1-2 per drink for beer, wine, or simple cocktails, or 15-20% of the total tab if you are running a bill across the night. Complex cocktails that take longer to make often earn a bit more.
- Hair salons and barbershops: 15-20% of the service price, split between multiple stylists if more than one person worked on you.
- Hotel housekeeping: a few dollars per night, left daily rather than only at checkout, since a different housekeeper may service the room each day.
- Taxi and rideshare: 15-20% of the fare, similar to restaurant norms, with more for help with heavy luggage or a difficult pickup location.
- Buffets: a reduced tip compared to full-service dining, often around 10% of the bill, since staff are refilling drinks and clearing plates rather than taking orders and serving courses.
None of these numbers are legally fixed. They reflect widely cited etiquette conventions in the US, and reasonable people (and different regions) land in different parts of the range.
How to calculate a tip
The math behind every tip is the same two steps, whether you are tipping alone or splitting a bill with a group:
- Tip amount = bill subtotal x tip percentage. Convert the percentage to a decimal first (18% becomes 0.18) and multiply it by the pre-tax bill.
- Total = bill subtotal + tip amount. Add the tip to the subtotal to get what you actually pay (before tax, if tax is being calculated separately).
- Per person = total / number of people, if you are splitting the bill evenly across a group.
Worked example: splitting a restaurant bill
Say four friends split an $85 bill and want to leave a 20% tip.
- Tip amount: $85 x 0.20 = $17.00
- Total with tip: $85 + $17.00 = $102.00
- Per person: $102.00 / 4 = $25.50
Each person owes $25.50 to cover their share of the food and the tip. If the restaurant also charges sales tax, that gets added on top of the subtotal separately, since (as covered in the FAQ) tips are conventionally calculated on the pre-tax amount, not the tax-inclusive total. For a quick gut check on the tax portion of a receipt, a sales tax calculator handles that part of the math, while the tip calculator handles the tip and the per-person split in one step so you do not have to do this arithmetic at the table.
How tipped wages work
The part most tipping guides skip is that tipping is not just etiquette, it is built into how tipped workers get paid. Under federal law, employers are allowed to pay tipped employees, such as servers and bartenders, a lower direct cash wage than the standard minimum wage, as long as tips make up the difference. This is called a "tip credit."
Federally, the direct cash wage for a tipped employee can be as low as $2.13 per hour, with the expectation that tips bring total hourly pay up to at least the federal minimum wage. If an employee's tips in a given week do not add up to that gap, the employer is legally required to make up the shortfall so the worker still earns at least minimum wage overall. This system, and the rules employers must follow to use it, is set out by the U.S. Department of Labor, which enforces federal wage and hour law.
State rules vary substantially on top of this federal floor. Some states allow a full tip credit similar to the federal rule, some allow only a partial credit (a higher minimum cash wage than $2.13), and a number of states, including California, require employers to pay tipped workers the full state minimum wage before tips on top. Because the rules differ so much by state, it is worth checking your own state's labor department if you want the exact cash wage a tipped worker in your area is entitled to.
This is also why tipping is not purely optional in an economic sense, even though it is not legally mandatory for a customer to pay: in many states, a server's base pay was set by law on the assumption that tips will make up a large share of their income.
Is tip income taxed?
Yes. In the United States, tips are taxable income, treated essentially the same as wages for tax purposes. Employees are required to report their tip income to their employer (typically for any month where tips exceed a small threshold), and that reported amount then gets included in the wages reported on Form W-2, with income tax, Social Security, and Medicare withheld accordingly.
If tips were not reported to an employer, such as cash tips that never made it onto a paycheck, the employee is still responsible for declaring them. The Internal Revenue Service publishes detailed guidance on tip recordkeeping and reporting, including the use of Form 4137 to calculate and pay the Social Security and Medicare tax owed on tips that were not reported to an employer. Keeping a simple daily log of cash tips is the easiest way to stay accurate if your workplace does not track them automatically.
Employers have reporting obligations too, including allocating tips in certain large food and beverage establishments if reported tips fall below a set share of gross sales. The details of allocated tips and recordkeeping rules go beyond what most customers need to know, but the core point matters for anyone tipping in cash: a tip you hand over is income to the person receiving it, not an off-the-books gift.
Putting it together
Tipping well means matching the situation, whether that is 18-20% at a sit-down restaurant, a couple of dollars per drink at a bar, or a flat few dollars per night for hotel housekeeping, rather than applying one number everywhere. It also helps to understand what is happening behind the scenes: tipped wages are often legally lower than standard minimum wage on the assumption that tips fill the gap, and every tip a worker receives is taxable income they are expected to report. When you are ready to work out an exact amount, including splitting a bill across a group, the tip calculator does the percentage math and the per-person split instantly, and the sales tax calculator can handle the tax portion of a receipt if you need that figure separately.