--- title: "Server Tip-Out Math: What You Keep" description: "Your number is what you kept after tipping out the busser, bar, and runner. Sales-based vs tips-based tip-outs side by side, and what to report." url: https://www.tipmaxapp.com/us/answers/server-tip-out-math language: en publisher: TipMax (Entermaurs Incorporated) date_published: 2026-09-23 last_verified: 2026-09-23 --- # I’m a server. After tip-outs, how much is mine, and which number do I report? **Short answer:** **Yours is what you kept after tip-outs, and that’s the number you report.** For taxes, you report only the tips you receive and retain, not what you pass to the busser, the bar, or the food runner. The trap is reporting what you collected instead. Wait staff (code 102) is on the IRS list, so the tips you kept and reported can count toward the federal tip deduction. ## Example math Friday night: **$2,000** in sales, **$360** in tips ($300 on cards, $60 cash). Your house splits the tip-out three ways. Here are two ways a house might set it up, side by side. | | Sales-based | Tips-based | | --- | --- | --- | | The rule (illustrative) | Say your house tips out 3% of sales: busser 1.5%, bar 1%, runner 0.5% | Say your house tips out 20% of tips: busser 10%, bar 5%, runner 5% | | Busser | $30 | $36 | | Bar | $20 | $18 | | Food runner | $10 | $18 | | Total out | **$60** | **$72** | | **You keep and report** | **$300** | **$288** | Now a slow Tuesday: **$1,000** in sales, and a big table left nothing, so you made **$25** in tips. Under the same illustrative 3%-of-sales rule, the tip-out is **$30**, which is **$5 more than you made in tips**. With a tips-based rule, the tip-out can never be bigger than your tips. > Still being verified: whether a sales-based required tip-out that exceeds tips received raises an FLSA issue Over the year, say you collect **$26,000** in tips and tip out **$4,500**. 1. Tips you kept = $26,000 − $4,500 = **$21,500**. That’s your reportable number. 2. $21,500 is under the $25,000 cap. Assume your income is under the phase-out. 3. Say your marginal rate is **12%** (illustrative; enter your own). Illustrative federal income-tax savings ≈ $21,500 × 0.12 = **$2,580**. 4. The $4,500 you tipped out belongs to the busser, bar, and runners. They report it as their tips. Social Security and Medicare still apply to your $21,500. **Not tax or legal advice.** The percentages above are made up for the example. Use your own house’s numbers. ## Plain English ### The number that’s yours For taxes, IRS Publication 531 is direct about it: if you share tips, report only what you receive and keep. Don’t report the part you pass on to other employees. Your W-2 for 2026 should show your reported tips in box 12 with code TP, and that amount is what you use to figure the deduction on Schedule 1-A Part II. Your daily record should show what you collected, what you tipped out, and **who got it**. If your house pays the runner and busser out of your card tips, write down their names and amounts anyway. That’s your proof that the number you reported is the number you kept. ### The wage-law trap: sales-based tip-outs on a slow night Federal wage law lets your employer require you to tip out or pool tips, and it doesn’t cap how much. What it forbids is your employer keeping any part of your tips, directly or through the pool. A tip-out figured on **sales** is where servers get squeezed. On a slow night, a percentage of sales can be more than you actually made in tips. Federal guidance doesn’t address the sales-vs-tips base directly. Two rules still hold either way: - Your employer can’t keep any part of your tips, and managers can’t take a share. See [What if my employer keeps part of the tips?](https://www.tipmaxapp.com/us/answers/employer-keeping-tips) - If you’re paid the **$2.13** federal tipped cash wage instead of the full **$7.25**, your employer must tell you the required tip-out amount, and can count toward your minimum wage only the tips you end up keeping. For more on the sales-based setup, see [My tip-out is a percentage of my sales, not my tips](https://www.tipmaxapp.com/us/answers/tip-out-based-on-sales). Your state may have stricter rules. ### The tax trap: reporting what you collected If you report $26,000 when you kept $21,500, you pay income tax on money that went to other people, and the same $4,500 gets reported twice: once by you, once by the staff who received it. Whose tips count for the deduction is covered in [If I tip out bussers or the bar, whose tips count?](https://www.tipmaxapp.com/us/answers/tip-outs-and-qualified-tips) ## Common mistakes - Reporting your total collected tips instead of what you kept. - Not writing down who you tipped out and how much. - Assuming a tip-out based on sales works the same as one based on tips. On a slow night it doesn’t. - Treating an auto-gratuity on a large party as tips. It’s a service charge, not a tip. See [Does an auto-gratuity count as a tip?](https://www.tipmaxapp.com/us/answers/qualified-tips-vs-service-charges) ## Official sources - [IRS Publication 531, Reporting Tip Income (report only tips you receive and retain; daily record of tips paid out)](https://www.irs.gov/publications/p531) - [IRS: Occupations that customarily and regularly received tips (Wait staff, code 102)](https://www.irs.gov/TippedOccupations) - [U.S. Department of Labor, Fact Sheet #15: Tipped Employees Under the FLSA](https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa) - [29 CFR Part 531, Subpart D (tip credit and tip pools)](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-A/part-531/subpart-D) - [Schedule 1-A (Form 1040)](https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf) ## Last verified September 23, 2026. Checked IRS Publication 531 on reporting tips you pass on, the IRS occupations list (code 102), DOL Fact Sheet #15, and 29 CFR 531.54 on required tip pools and notice. **Still open:** Federal guidance doesn’t directly address tip-outs figured on sales rather than tips, including a night when the tip-out is more than you made. No federal source sets a standard tip-out percentage. ## Related - [My tip-out is a percentage of my sales, not my tips. How does that work?](https://www.tipmaxapp.com/us/answers/tip-out-based-on-sales) - [Do I pay tax on the tips I tip out?](https://www.tipmaxapp.com/us/answers/do-i-pay-tax-on-tips-i-tip-out) - [I’m a bartender. How do tip share from servers and my tip-out to barbacks work?](https://www.tipmaxapp.com/us/answers/bartender-tip-share-and-barback-tip-out) - [I’m a server. How does the federal tip deduction affect me?](https://www.tipmaxapp.com/us/answers/no-tax-on-tips-for-servers) ## How TipMax helps with this Kept vs collected, every shift. TipMax is an iPhone app for servers and bartenders that tracks tips and tip-outs and turns a restaurant menu into study flashcards. - Record tip-outs every shift, with tip-out rules for each job. - See your true hourly rate: wage plus tips. - See your top shifts, best days, and which job actually pays. Download TipMax free: https://apps.apple.com/us/app/tipmax-study-track-earn/id6744850146 --- TipMax Answers explains public IRS and U.S. Department of Labor guidance in plain English for tipped workers. It is **not tax, legal, or accounting advice**. Federal rules are a floor; your state may add its own tip rules. Confirm with IRS.gov, DOL.gov, your state labor agency, or a qualified professional. TipMax the app helps you track tips and tip-outs; it does not file your taxes or decide tip-pool disputes.