No Tax on Tips Guide for Salon Owners

If you’re a salon owner, the new “No Tax on Tips” federal tax law — which runs through 2028 — could benefit your business in two completely different ways.

First, if you personally perform services and earn tips, you could deduct up to $25,000 of that tip income from federal taxes.

Second, if you have W-2 employees who earn tips, your business may qualify for the 45B FICA Tip Credit — a federal tax credit based on the employer payroll taxes you pay on employee tips. For many salon owners, this second benefit is where the real money is.

But here’s the catch: not every tip qualifies, and if you get the setup wrong, you won’t get either benefit.

The IRS has specific rules about what counts as a “true tip” under this law, and those rules apply to both your personal tips and your employees’ tips. Get it wrong and you lose the personal deduction, the business credit, or both.

This guide breaks down what salon owners need to know to maximize both benefits without running into compliance issues.

Inside you’ll learn:

• What qualifies as a tip under this law
• How the 45B FICA Tip Credit works for your business
• How to set up your salon’s pricing and POS system so everything qualifies.
• How tips are treated differently for W-2 employees versus booth renters
• What mistakes disqualify tips entirely
• How to protect your business from audit risks.

Download your copy now, and set your salon up to maximize tip income benefits this filing season!