Free restaurant calculator
FICA tip credit calculator
Free to use. Nothing you type leaves your browser. Figures checked against official sources on October 1, 2026. Estimates only, not legal or tax advice.
Enter your numbers
The hourly wage you pay, not counting tips.
Result
Enter hours and reported tips to estimate the credit.
The formula
- Pay at $5.15 = hours × $5.15
- Tips not counted = pay at $5.15 − wages actually paid, when the result is above zero
- Creditable tips = reported tips − tips not counted
- Estimated credit = creditable tips × 7.65%
How to read the result
The $5.15 figure is the federal minimum wage as it stood on January 1, 2007. It is fixed in the credit's rules and does not move with later increases.
At the Massachusetts service rate of $6.75 an hour, the cash wage is already above $5.15, so every reported tip counts toward the credit. The floor only reduces the credit where the cash wage is below $5.15, as with the federal $2.13 rate in other states.
The IRS figures the $5.15 test month by month, so enter one employee's hours, wages and tips for one month. This is an estimate. Form 8846 has further steps, including a lower rate for any employee whose wages and tips pass the Social Security wage base, and the credit is a general business credit claimed on the restaurant's income tax return. Your tax adviser works out the final figure.
Source: IRS: About Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips · Checked
Massachusetts rules
The rules behind the numbers
Can a restaurant get a tax credit for the Social Security and Medicare it pays on tips?
Yes. Food and beverage employers where tipping is customary can claim a credit on Form 8846 for the employer's 7.65% Social Security and Medicare paid on tips. Tips needed to bring an employee's pay up to $5.15 an hour, the federal minimum wage on January 1, 2007, don't count toward it.
Full answer and official sourceDoes the restaurant withhold taxes on reported tips?
Yes. The employer withholds federal income tax and the employee's Social Security and Medicare on reported tips, taking the money from the employee's regular wages or other funds the employee provides, never from the tips themselves. The employer also pays its own matching Social Security and Medicare on those tips.
Full answer and official sourceWhen do servers and bartenders have to report their tips to the restaurant?
Any employee who receives $20 or more in cash and charged tips in a month must report them to the employer by the 10th of the following month. If the 10th falls on a weekend or holiday, the report is due the next business day.
Full answer and official sourceWhat is the 2026 Social Security wage base?
For 2026, Social Security tax of 6.2% for the employee and 6.2% for the employer applies to the first $184,500 of wages and tips. Medicare, 1.45% each, has no cap, and employers withhold an extra 0.9% Additional Medicare Tax on an employee's wages above $200,000 in the year, with no employer match.
Full answer and official source
Rules checked against official sources on . General information, not legal or tax advice.
Common questions
What is the FICA tip credit?
It is a federal income tax credit for food and beverage employers, equal to the employer's 7.65% Social Security and Medicare tax on employees' tips above the amount needed to bring their pay to $5.15 an hour. It is claimed on IRS Form 8846.
Who qualifies for the FICA tip credit?
Employers whose employees receive tips for providing, delivering or serving food or beverages where tipping is customary, and who paid or incurred employer Social Security and Medicare tax on those tips.
How is the FICA tip credit calculated?
Take the employee's reported tips, subtract any tips needed to bring their wages up to $5.15 an hour, and multiply the rest by 7.65%. In the IRS example, a server works 100 hours at $3.75 with $450 in tips: $140 of tips is not counted, leaving $310 that counts. At 7.65%, that is about $23.72.
Your restaurant remains the employer of record and approves payroll and employment decisions. BOHO is not a PEO, a staffing agency, or legal counsel. A calculator gives an estimate from the numbers you enter. Confirm anything that affects pay or taxes with your payroll provider, attorney or tax adviser.
Want these numbers checked every pay cycle?
Your restaurant remains the employer of record and approves payroll and employment decisions. BOHO is not a PEO, a staffing agency, or legal counsel.