Tip Income


DEFINITION of 'Tip Income'

Income that a service professional earns that is not part of a regular wage. Tip income can come from a gratuity left by a customer at a restaurant, money received by a porter for carrying luggage to a hotel room, or from other activities that are not covered by the employer. Tip income can be considered a secondary form of income.


Some businesses, such as restaurants, assume that employees will earn tips and will thus provide a lower hourly wage rate. If an individual collects tips over a given amount during a calendar month, it must be reported to the employer and to the government, since taxes have not been withheld like they are for normal income.

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