Finance Formula • Published on September 01, 2026 • Last updated September 01, 2026
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Total pre-tax or subtotal cost of meal/service
Gratuity rate percentage (e.g. 15%, 18%, 20%)
Calculated gratuity payout value
The tip calculation formula computes the gratuity amount by taking a chosen percentage of the subtotal or final check. It allows diners and customers to reward good service accurately.
Gratuity is traditionally calculated on the pre-tax subtotal to avoid tipping on sales tax. However, calculating tip on the total bill is widely practiced for convenience.
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