Alabama tips tax calculator: no state law on tipped pay
Alabama is a double outlier for tipped workers: it has no minimum wage statute of its own, and its Department of Revenue classifies the new federal tips deduction as “Tied to Federal: No,” so tips stay inside Alabama gross income.
Why the federal break stops at the Alabama line
Alabama does not start its return from federal taxable income. It builds its own gross income, which is why the Department’s October 2025 OBBBA analysis lists Section 224 separately and marks it as not tied to federal law. The same analysis treats the overtime deduction the same way, so a server who also works overtime gets neither break on the state return for 2025.
No Alabama bill creating its own tips exclusion had been enacted when we checked, so 2026 follows the 2025 answer.
Alabama figures
| Cash wage / minimum | $2.13 / $7.25 |
|---|---|
| In force | July 1, 2026 |
| Next change | none scheduled |
| Tipped threshold | More than $30 a month in tips |
| Tips on the 2025 return | tips stay taxable in this state. The Department’s OBBBA analysis lists New Section 224 (No Tax on Tips) as “Tied to Federal: No,” so the federal deduction does not carry to the Alabama return. Source: Alabama Department of Revenue |
| Tips on the 2026 return | tips stay taxable in this state. No Alabama tips exclusion had been enacted when we checked; the 2025 position continues. Source: Alabama Department of Revenue |
Pay rules when the state is silent
Because Alabama never enacted a minimum wage, the only floor is the federal Fair Labor Standards Act. A restaurant covered by the FLSA may pay $2.13 an hour in cash and claim up to $5.12 of tips; if tips fall short, the federal rule requires the employer to top pay up to $7.25 for the workweek. An employer outside FLSA coverage owes nothing under state law, and wage complaints for covered jobs go to the U.S. Department of Labor.
A Mobile server’s year
A single server in Mobile with $16,000 of tips and $21,000 of other wages deducts $16,000 on Schedule 1-A and saves $1,770 of federal income tax. On the Alabama return the full $16,000 is still taxed. In a 30-hour week with $120 of tips, cash wages of $64 plus tips leave $34 for the employer to make up.
Run an Alabama workweek through the FLSA test
Where these figures come from
- Alabama Department of Revenue · U.S. DOL Wage and Hour Division (Alabama has no state minimum wage law)
- The One, Big, Beautiful Bill Act — Analysis and Tax Provisions (executive summary) (2025-10-31)
- Minimum Wages for Tipped Employees (table by state) (2026-07-01)
Federal rules: how the deduction works. Nearby: Florida, Georgia, Mississippi, Tennessee.
Figures verified against primary sources on