| EFFECTIVE DATE | WASHINGTON D.C. MINIMUM WAGE |
| July 1, 2024 | $17.50 |
| July 1, 2025 | $17.95 |
| July 1, 2026 | $18.40 |
| July 1, 2027 | TBD |
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“Tipped employees” are classified as someone who regularly makes over $30 a month in tips. Similar to other employees, “tipped employees” have the right to make a minimum wage of $18.40 per hour. However, an employer only has to pay employees $10.30 per hour in his or her paycheck, as long as the employee makes a minimum of $8.10 per hour in tips, making the total pay per hour at least $18.40.
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 $8.10 per hour in tips in a given work week, the employer must pay the employee’s earnings equal to $18.40 per hour.
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.
There are a few exemptions detailed in the Minimum Wage Revision Act; however, the primary exemption includes any person exempt under the Fair Labor Standards Act (FLSA) classifications.
Additional exceptions to the Washington, D.C. minimum wage include:
Under the Minimum Wage Act Revision Act, minor employees under the age of 18 may be paid a subminimum wage of no less than the federal minimum wage rate. Additionally, all minor employees must agree with the employer on the wages he or she shall receive for each day, week, month, year, or per piece for work performed.
Employers must also note that provisions under the territory's Youth Employment Act may also affect wage and hour rules for minor employees.
Students employed at higher education institutions may also be paid a subminimum wage of no less than the federal minimum wage rate. Most post-secondary institutions are considered "Higher Education" institutions, provided the business has a license from the Higher Education Licensure Commission (HELC).
Mirroring federal law under the FLSA, employees with disabilities may be paid less than the federal minimum wage ($7.25 per hour) if the employer obtains a Section 14(c) certificate issued by the US DOL. For an employee to qualify for subminimum wages under a Section 14(c) certificate, the employee must have disabilities that impair his or her productivity for the work performed.
Note that an employee with educational disabilities is not covered under Section 14(c) and canno.t legally be paid subminimum wages.
For businesses that do not have a Section 14(c) license in the territory of Washington, D.C., employers must pay disabled employees the full territory minimum wage of $18.40 per hour.
Washington, D.C. highlights some unique exemptions that affect a worker's right to the territory's minimum wage and overtime law:
The territory of Washington, D.C. recognizes the federal overtime regulations set forth by the FLSA. If an employee works more than 40 hours in an average seven-day workweek, the employee is to receive an overtime rate of 1.5 times the employee's regular hourly rate.
Washington, D.C. does not require employers to give specific meal or rest breaks to adult employees; however, employers that choose to offer such breaks must adhere to the specific guidelines set forth by the FLSA, regarding payment and length.
For compliance with Washington D.C. labor laws, employers must visibly display the Washington D.C. minimum wage in a conspicuous location that all employees have access to in the workplace. An all-in-one Washington D.C. Labor Law Poster will cover all the required territory and federal 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 in Washington D.C.
Under the Washington, D.C. Wage Payment and Collection Law, employers violating the territory's wage and hour laws can be subject to the following penalties required by the District of Columbia Department of Employment Services (DOES):
Businesses struggling to maintain minimum wage compliance or manage payroll may want to consider outsourcing payroll to a Washington, D.C. payroll services company. 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.