--- title: "What Is a Tip-Out? Tip-Outs vs Tip Pools" description: "A tip-out is part of your tips you hand to coworkers; a tip pool is one pot split among a group. For taxes, you report only what you keep." url: https://www.tipmaxapp.com/us/answers/what-is-a-tip-out language: en publisher: TipMax (Entermaurs Incorporated) date_published: 2026-09-23 last_verified: 2026-09-23 --- # What’s a tip-out, and how is it different from a tip pool? **Short answer:** A **tip-out** is when you hand part of your own tips to coworkers, like a busser or the bar. A **tip pool** is when tips go into one pot and get divided among the group. Federal wage law lets your employer require either one, within limits. For taxes, the trap is the same in both: you report only what you **keep**, and whoever receives a share reports that share. ## Example math Same Friday, two setups. Say you collect **$400** in tips. **Tip-out.** Say your house has you tip out the busser 10% of your tips (illustrative only). 1. Tip-out = $400 × 0.10 = **$40** to the busser. 2. You keep $400 − $40 = **$360**. That’s the number you report. 3. The busser reports the **$40** as tips they received. **Tip pool.** Say every server’s tips go into one pot, and the pot for the night is **$1,200**. The house formula gives you a **$300** share (illustrative only). 1. You put in $400 and get back $300. 2. You report **$300**, the share you kept. 3. Everyone else in the pool reports their own share. Either way, the same dollars get reported once, by the person who ends up with them. **Not tax or legal advice.** ## Plain English ### Two ways to share the same money - **Tip-out (tip splitting):** you earned the tips, and you pass part of them on, for example a share to the busser at the end of a shift. - **Tip pool:** tips from a group go into one pot, and the pot is split by a formula your workplace sets, such as by hours or points. The line between them is blurry in real life. For the federal rules below, both work the same way. ### Federal wage law: your employer can require it Federal wage law lets employers require you to share or pool tips with other eligible employees. Who counts as eligible depends on your cash wage: - If you’re paid a tipped cash wage below $7.25 an hour, a required pool can include only workers in customarily tipped jobs, like servers, bussers, and service bartenders. - If everyone gets at least $7.25 an hour in cash wages, a required pool can also include cooks and dishwashers. Details are in [Can my employer make me tip out or join a tip pool?](https://www.tipmaxapp.com/us/answers/can-my-employer-require-a-tip-pool) Wage law also treats the split money as tips of whoever keeps it. When a server gives part of their tips to a busser, the part the server keeps is the server’s tips, and the part the busser gets is the busser’s tips. ### For taxes: report what you keep - **If you tip out,** report only the tips you receive and keep. Don’t report the part you pass on. - **If you receive tip-outs,** you must report them. They count as your tips. - **Keep a daily record** of what you paid out and who you paid it to. Money you receive from a tip pool or tip-out can count toward the federal tip deduction. Whose tips count is covered in [If I tip out bussers or the bar, whose tips count for the deduction?](https://www.tipmaxapp.com/us/answers/tip-outs-and-qualified-tips) ### There’s no standard percentage No federal rule sets how much a tip-out should be. The percentages on this page are made up to show the math. Your house sets its own. ## Common mistakes - Reporting the full amount you collected before tip-outs. - Receiving tip-outs in cash and not reporting them because “they’re from coworkers, not customers.” - Not writing down who you tipped out and how much. - Assuming a tip pool and a tip-out follow different federal tax rules. They don’t. ## Official sources - [U.S. Department of Labor, Fact Sheet #15: Tipped Employees Under the FLSA (tip pooling)](https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa) - [eCFR: 29 CFR Part 531, Subpart D (531.54, tip pooling)](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-A/part-531/subpart-D) - [IRS Publication 531, Reporting Tip Income (tip-splitting and tip-pooling)](https://www.irs.gov/publications/p531) - [IRS: Tip recordkeeping and reporting](https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting) ## Last verified September 23, 2026. Checked DOL Fact Sheet #15 on tip pooling, the federal tip-pooling regulation (29 CFR 531.54), IRS Publication 531 on tip-splitting and tip-pooling, and the IRS tip recordkeeping page. ## Related - [Can my employer make me tip out or join a tip pool?](https://www.tipmaxapp.com/us/answers/can-my-employer-require-a-tip-pool) - [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 server. After tip-outs, how much is mine, and which number do I report?](https://www.tipmaxapp.com/us/answers/server-tip-out-math) - [If I tip out bussers or the bar, whose tips count for the deduction?](https://www.tipmaxapp.com/us/answers/tip-outs-and-qualified-tips) ## How TipMax helps with this Every tip-out changes the number that’s yours. 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. - Log cash and card tips per shift in seconds. 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.