Illinois Tipped Wage Calculator

How the tip credit works

Illinois lets an employer count some of your tips toward its minimum wage obligation. The Illinois Minimum Wage Law caps that credit at 40% of the applicable minimum wage, which is why the tipped cash wage across most of the state is exactly 60% of the full Illinois minimum wage — $9.00 against $15.00 in 2026. The credit is a claim against tips you actually received, not a license to pay less. If cash wages plus tips do not reach the full minimum for the workweek, the employer owes the difference, and that test runs week by week.

Where you work changes the numbers substantially, because Chicago and Cook County have their own ordinances:

Cook County municipalities were allowed to opt out of the county ordinance, and many did — those places fall back to the state figures. Chicago is governed entirely by its own ordinance and its rates adjust every 1 July.

Chicago paused its tip credit phase-out

Chicago passed the One Fair Wage ordinance in October 2023, phasing the tip credit down from 40% starting 1 July 2024 with the aim of eliminating it entirely by 2028. It reached 24% and then stopped: on 20 May 2026 the City Council paused the phase-out for two years, so the reduction to 16% scheduled for 1 July 2026 did not take effect. The credit remains at 24%.

The cash tipped wage still went up on 1 July 2026, to $12.96, which confuses a lot of people. That is because Chicago's base minimum wage indexes to inflation each July, capped at 2.5% — so with the credit percentage frozen at 24%, a rising base pushes the cash wage up with it. The credit as a share stayed the same; the dollars underneath it grew. Chicago's higher minimum wage also feeds into the Chicago paycheck calculator, though the income tax side is identical to the rest of Illinois — the city has no local wage tax.

Overtime is where employers get it wrong

This is the single most common tipped-wage violation, and it is worth understanding precisely. Overtime for a tipped employee is calculated on the full minimum wage, not the cash wage. You take one and a half times the applicable minimum, and only then subtract the tip credit. In most of Illinois:

• Full minimum $15.00 × 1.5 = $22.50
• Less the tip credit of $6.00
• Cash overtime rate = $16.50 an hour

The wrong method — one and a half times the $9.00 cash wage, giving $13.50 — costs you $3.00 for every overtime hour worked. Over a busy season that is not a rounding error. The calculator above applies the correct method automatically once you enter more than 40 hours, and the general rules on regular-rate arithmetic are covered on the Illinois overtime calculator.

Tip pooling, service charges and what your employer cannot do

Three rules do most of the work here:

• Managers and supervisors can never keep employee tips, including through a pool. The only tips a manager may retain are those received directly and solely for service the manager personally provided.
• Illinois gratuities belong to the employee. Under 820 ILCS 115/4.1 tips are the employee's property and must be paid over within 13 days after the pay period ends. The one permitted deduction is a proportionate share of the credit card processing fee on charged tips.
• Back-of-house pooling is allowed only without a tip credit. An employer that pays the full minimum wage in cash and claims no tip credit may run a nontraditional pool including cooks and dishwashers. An employer claiming the credit may not.

Service charges are a separate category and people lose money by not noticing. An automatic gratuity on a large party, a bottle service charge, a mandatory delivery fee — anything the customer must pay and cannot set — is not a tip. Distributed to you it is ordinary wages: it runs through payroll, it cannot support a tip credit, and it is not reported as tips. A tip is voluntary and the customer decides the amount.

One more rule changed in late 2024 and is worth knowing. The 2021 "80/20" rule, which limited how much non-tipped side work a tipped employee could do while the employer claimed the credit, was vacated by the Fifth Circuit in August 2024. A final rule effective 17 December 2024 restored the older text: the tip credit applies to a tipped occupation including related duties, with no quantitative cap on them. Rolling silverware no longer runs a stopwatch.

Tax on tips: what actually changed and what did not

Your reporting duty is unchanged. Tips of $20 or more in a month from one employer must be reported to that employer by the 10th of the following month; the employer then withholds income tax and FICA on them and pays its own FICA share. Under $20 in a month, the employer reporting step falls away but the income remains taxable on your return. Large food and beverage establishments file Form 8027, and where an establishment's reported tips come to less than 8% of gross receipts, the shortfall is allocated among employees and shows up in the allocated tips box of your W-2 — with no withholding taken against it, which is how tipped workers end up with an unexpected April bill.

What did change is IRC section 224, enacted in July 2025: a federal deduction for qualified tips of up to $25,000 a year, for tax years 2025 through 2028, reduced by $100 for each $1,000 of income above $150,000 ($300,000 joint). Treasury issued final regulations in April 2026 listing more than seventy occupations that customarily receive tips, each with its own code, and from 2026 your W-2 carries the tip figure in box 12 and the occupation code in box 14b. Only voluntary tips qualify — service charges do not — and tips earned in a specified service trade or business are excluded.

Three things it does not do, all of which are misreported constantly:

• It does not exempt tips from FICA. Social Security and Medicare still apply in full, at 7.65% from you and 7.65% from your employer.
• It gives you nothing in Illinois. The deduction is taken below the adjusted gross income line on Schedule 1-A. Form IL-1040 starts from federal AGI, and Illinois has enacted no matching subtraction, so every tipped dollar is still taxed at 4.95%. The rate and its mechanics are covered on the Illinois income tax rate page.
• It does not appear in your paycheck automatically. Withholding tables were not restructured for it; you would have to account for it on your Form W-4.

Checking a real week

Put your actual numbers in above — hours, tips after any valid pool, and the cash rate your employer pays. If the tool shows make-up pay owed, ask for the weekly calculation in writing. Since the Pay Stub Protection Act your employer has to give you itemized records, and the pay stub guide explains what those records must contain. Where the shortfall is real, Illinois wage claims carry treble damages plus 5% per month, which tends to concentrate an employer's attention. For what lands in your bank account once the gross is right, carry the figure into the hourly paycheck calculator.