| EFFECTIVE DATE | TEXAS MINIMUM WAGE |
| September 1, 1997 | $5.15 |
| July 24, 2007 | $5.85 |
| July 24, 2008 | $6.55 |
| July 24, 2009 | $7.25 |
| 2025 (Current) | $7.25 (Still Current Federal Minimum Wage) |
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“Tipped employees” are classified as those regularly making over $30 a month in tips. Like other employees, “tipped employees” have the right to make a minimum wage of $7.25 per hour. However, an employer only has to pay employees $2.13 per hour in his or her paycheck, as long as the employee makes a minimum of $5.12 per hour in tips, making the total pay per hour $7.25.
Employers may take a tip credit against an employee's wages for the amount earned in tips. To make up the difference in pay, if an employee makes less than $5.12 per hour in tips in a given work week, the employer must make the employee’s earnings equal to $7.25 per hour for the work week.
Signed by President Trump on July 4, 2025, the One Big Beautiful Bill Act allows applicable employees, including those self-employed, to claim a tax reduction on qualified tips received from his or her occupation. The tip tax deduction is effective from January 1, 2025 through December 31, 2028.
The occupation must be listed by the IRS as “customarily and regularly” receiving tips and must be reported on a Form W-2 or other applicable statements that report qualified tips (ex: Form 4137 for tips not reported to the employer).
An employee can deduct an annual maximum amount of $25,000. For self-employed individuals, the deduction amount cannot exceed his or her net income from the trade or business where the tips were earned. If an employee’s modified adjusted gross income (MAGI) exceeds $150,000, or $300,000 for employees filing taxes jointly, the amount allowed to be deducted will be reduced by $100 for each $1,000 earned above the MAGI.
To be eligible for the tip tax deduction, employees must include a Social Security number on the tax return for the given tax year. If married, the employee must also file jointly to remain eligible. Even if individuals opt for a standard deduction (vs. itemized deductions) on a tax return, the individual is still eligible for the annual maximum deduction for tipped wages.
Note that self-employed individuals categorized in a Specific Trade or Business (SSTB) under section 199A are NOT eligible.
All employers must file information returns to the IRS or Social Security Administration (SSA), as well as deliver the applicable forms, including a W-2, to employees that show the cash tips received and the occupation of the tip recipient.
Authorized by Section 6(g) of the FLSA, employees under the age of 20 may receive any wage rate above $4.25 per hour for a limited period of 90 days after he or she is employed.
In Texas, children under the age of 18 are eligible to receive minimum wage and overtime pay. However, the sub-minimum wage of $4.25 per hour is permissible for the first 90 days of employment. Further, children that are tipped employees can be paid the same as other tipped employees.
There are various exemptions from the Texas Minimum Wage Act; however, the primary exemption is any person exempt under FLSA classification.
Further exemptions include:
Texas does not require employers to give specific meal or rest breaks to adult employees. However, employers that offer employees breaks must adhere to the specific guidelines set forth by the FLSA regarding meal and rest breaks.
Due to Texas adhering to the federal minimum wage, the state does not have a unique labor law poster. Instead, in compliance with the FLSA and Texas labor laws, employers must visibly display the federal minimum wage poster alongside other state and federal labor law posters, in a conspicuous location that all employees have access to. An all-in-one Texas Labor Law Poster will cover all required federal and state labor law postings.
Note that each time the minimum wage is updated, the labor law poster must be replaced in the workplace. A labor law poster subscription service will automatically provide updated mandatory notices that need to be posted for employees as additional changes take place with state or local laws.
If an employee feels that he or she has been paid a wage rate lower than the state minimum wage requires, the employee may choose to take legal action. Employees may file a wage claim with the Texas Workforce Commission, or in civil court.
Any claims filed with the TWC must be filed within 180 days after the wages were due. Employees have two years from the date the wages were due to file a lawsuit.
Businesses struggling to maintain minimum wage compliance or manage payroll may want to consider outsourcing payroll to a Texas Payroll Provider. Areas for additional knowledge and learning include the basics of payroll and what to know about modern payroll software.
To learn more about how Employer Pass is helping countless businesses maintain minimum wage compliance, contact us today or use the find a provider tool.