Welcome back to Shopping and Spending with Percentages! So far in this course, you have tackled discounts, sale prices, and sales tax — percentages that appear on the price tag and at the register. In this third lesson, we shift from the checkout counter to the table: calculating a tip.

Tipping comes up almost every time you eat at a restaurant, visit a hair salon, or use a delivery service. By the end of this lesson, you will be able to compute a tip at common rates such as 15%, 18%, and 20%, and determine the total amount paid by adding the tip to the original bill. The math follows the same multiply-then-add pattern you used for sales tax, so the steps will feel familiar right away.

A tip (also called a gratuity) is an extra amount of money given to a service worker on top of the bill. In the United States, it is customary to leave a tip at restaurants, hair salons, and for services like food delivery or rideshares. The tip is calculated as a percentage of the pretax bill — the total for the food or service before any sales tax is applied.

The most widely used tip rates are 15%, 18%, and 20%. A 15% tip is generally seen as the starting point for acceptable service, 18% reflects solid appreciation, and 20% is a common choice for great service. Knowing how to calculate each of these quickly is a practical everyday skill, and the technique is one you already have: convert the percent to a decimal and multiply.

Finding a tip is a single conversion followed by a single multiplication — the same approach you used for sales tax in the previous lesson.

Let's say your dinner bill is $50.00 and you want to leave an 18% tip.

Step 1 — Convert the rate: $18\% = 0.18$

Step 2 — Multiply:

To build a feel for what each rate means in real dollars, let's compare all three standard rates on the same $65.00 restaurant bill.

Once you know the tip, add it to the original bill to get the total payment — the full amount written on the receipt or handed to the server.

Using the 18% tip on the $65.00 bill from the previous section:

You pay $76.70 in total. Two steps, done.

You can also reach the same answer in one step. Since you are adding a percentage on top of the bill, multiply the bill by plus the tip rate as a decimal:

Sometimes the multiplication produces more than two decimal places. Suppose the bill is $47.50 and you want to leave a 15% tip:

Since you cannot pay half a cent, round to the nearest cent: $7.13. The total payment becomes $47.50 + 7.13 = 54.63$, or $54.63. As with sales tax, when the third decimal digit is 5 or higher, round up.

In everyday life, many people round tips to the nearest whole dollar for convenience. For instance, you might round that $7.13 up to $8.00. Either approach is perfectly fine — the key skill is knowing how to calculate the exact amount first so you have a solid starting point.

When dining with friends, it is common to split the total evenly. After calculating the tip and the total payment, simply divide by the number of people.

Imagine four friends share a meal with a bill of $120.00 and decide on a 20% tip.

1. Tip: $120.00 \times 0.20 = 24.00$

Keep these pointers in mind as you practice:

• Tip on the pretax amount. The tip percentage should be applied to the bill before sales tax is added. If your receipt shows both a subtotal and a tax-included total, use the subtotal.
• Double-check the decimal conversion. Make sure to move the decimal point exactly two places to the left: $18\% = 0.18$, not $0.018$.
• Use a quick reasonableness check. A 20% tip is one-fifth of the bill, so on a $50 bill it should be about $10. If your answer looks too large or too small, revisit the decimal placement.

In this lesson, you learned how to calculate a tip by multiplying the bill by the tip rate expressed as a decimal, and how to find the total payment by adding the tip to the original bill. You also saw that the one-step shortcut — multiplying by $(1 + \text{rate})$ — carries over from the sales tax lesson, and that splitting a bill among friends is simply one more division at the end. Whether the rate is 15%, 18%, or 20%, the process stays the same.

Up next, you will put these skills into action with hands-on exercises. You will calculate tip amounts at different rates, find total payments, and work through a shared dinner scenario — so grab your calculator and let's see how quickly these calculations become second nature!