Federal Minimum Wage After Tax 2026

Federal Minimum Wage After Tax in 2026

A full-time Federal worker at $7.25 an hour grosses $15,080 a year. After $0 in federal income tax, $1,154 in FICA and $0 in state income tax, take-home pay is about $13,926 a year, or $1,161 a month and $268 a week.

The federal minimum wage is $7.25/hr -- 17 years without an increase. See exactly how much workers in the 14 states at the federal floor keep after FICA and income taxes in 2026.

Federal Minimum Wage Take-Home Calculator

State income tax not included -- use individual state pages for state-specific totals. This calculator shows federal-only deductions.

The Federal Minimum Wage in 2026: 17 Years of $7.25

The federal minimum wage was last raised to $7.25 per hour on July 24, 2009. As of October 2026, it has been at that rate for 17 years and 3 months -- the longest stretch without a federal increase in the history of the Fair Labor Standards Act since it established the first federal minimum wage in 1938.

The Fair Labor Standards Act (FLSA) establishes the federal minimum wage floor. Any state that does not set a higher minimum wage automatically applies $7.25 to all covered workers. As of 2026, 14 states remain at the federal floor: Alabama, Georgia (for covered workers), Idaho, Indiana, Iowa, Kansas, Kentucky, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, South Carolina, Tennessee, Texas, Utah, West Virginia, and Wisconsin. (Several have state minimums that are identical to the federal rate.)

What the FLSA Covers -- and What It Doesn't

The federal minimum wage applies to "covered" employees under the FLSA. Coverage is broad but not universal. Workers not covered by the federal minimum wage include:

A Brief History of Federal Minimum Wage Increases

The Federal Tipped Minimum Wage: Stuck Since 1991

The federal tipped minimum wage of $2.13/hr has not changed since 1991 -- 35 years. The FLSA permits employers of tipped workers (those who regularly receive more than $30/month in tips) to pay a lower cash wage, using expected tip income to make up the difference to reach $7.25/hr. This is called the "tip credit."

If tips in any given pay period do not bring total hourly compensation to $7.25/hr, the employer must make up the shortfall. In practice, enforcement depends on workers reporting shortfalls, which does not always happen. Seven states and D.C. have eliminated the tip credit entirely, requiring employers to pay the full minimum wage before tips: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington.

The most common comparison rarely seen published: a tipped worker at $2.13/hr with no tips in a pay period (uncommon but legally possible in a slow or no-customer shift) would receive $2.13/hr unless the employer pays the makeup. A non-tipped worker in the same state is guaranteed $7.25/hr regardless of business conditions.

The OBBBA 2026: New Federal Tax Relief for Minimum Wage Workers

The One Big Beautiful Budget Act (OBBBA), signed into law in 2026, introduced two new federal income tax provisions that affect minimum wage workers who earn overtime or work in tipped positions:

For a federal minimum wage worker ($7.25/hr standard) who regularly works overtime, the overtime exemption can provide meaningful tax relief. A worker earning $7.25/hr for 50 hours/week (10 overtime hours) earns $10.875/hr for those extra hours. The $3.625 overtime premium on 10 hours per week over 52 weeks totals approximately $1,885 in annual overtime premium -- all of which would be exempt from federal income tax under OBBBA.

Note: Four states do not conform to the OBBBA overtime and tips exemptions for state tax purposes: Alabama, Colorado, New Mexico, and Washington D.C. Workers in those states still owe state income tax on overtime premiums and tips even after OBBBA.

States at the Federal Minimum Wage Floor in 2026

The following states apply the $7.25/hr federal minimum wage as their effective floor for covered workers:

Why Take-Home Differs in $7.25 States

Every $7.25/hr state produces the same gross income ($15,080/year at 40 hours/52 weeks), and every worker regardless of state pays the same federal income tax and FICA. The difference in take-home pay between states at the federal floor comes entirely from state income tax policy:

Note: State tax estimates use effective rates on $15,080 gross income. Actual amounts vary based on state standard deductions and filing status.

The Inflation Math: What $7.25 Is Really Worth

The Consumer Price Index (CPI) has risen approximately 46% since July 2009. To maintain the same purchasing power as $7.25 in July 2009, the minimum wage would need to be approximately $10.57 in 2026. Instead it remains at $7.25 -- meaning the effective purchasing power of the federal minimum wage has declined by approximately 30% in real terms over the past 17 years.

The 1968 federal minimum wage of $1.60/hr, adjusted for inflation to 2026, would be approximately $14.45/hr. No federal minimum wage since 1968 has approached this inflation-adjusted value. The current $7.25 federal minimum represents roughly 50 cents on the dollar compared to the historic purchasing power peak of the federal minimum wage.

Explore Take-Home Pay by State

The federal minimum wage is the floor, but state income taxes determine how much workers keep. Browse every state's take-home calculator:

Frequently Asked Questions

For tax years 2025 through 2028 the overtime premium, the extra half of time-and-a-half and nothing beyond it, is deductible from federal income tax up to $12,500 filing single or $25,000 filing jointly (IRC s.225). Qualified tips carry a separate deduction capped at $25,000 (IRC s.224). Both phase out above $150,000 of income. Neither touches Social Security or Medicare, so FICA still comes off every overtime and tip dollar. Employers report qualified overtime in W-2 box 12 under code TT from 2026.

Which states pass the OBBBA overtime deduction through to state tax

The overtime and tips deductions sit below the line, reducing federal taxable income rather than federal AGI. Only the seven states that build their own tax from federal taxable income could pick them up automatically, and three of those do not. That leaves four.

Colorado still allows the tips deduction to flow through; only overtime was decoupled. Verified October 2026.