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New legislation could extend the FICA Tip Credit beyond food and beverage. Here’s what beauty industry employers need to know.
The proposed No Tax on Tips Act is gaining traction, and with it, a potential expansion of the FICA Tip Credit. While this credit has historically been limited to restaurants and other food service employers, new updates could bring tax savings to beauty professionals across salons, spas and barbershops. Below, we break down the basics and how you can prepare.
The FICA Tip Credit allows eligible employers to recover a portion of the Social Security and Medicare taxes paid on their employees’ reported tip income. Traditionally, this has applied to food and beverage establishments, where tips are a significant part of wages.
For qualifying employers, this federal credit can offset thousands in annual payroll tax liability without changing how tips are reported or paid.
The No Tax on Tips Act is a federal bill that proposes expanding access to the FICA Tip Credit to include certain beauty and personal care businesses — an important move for salons, spas and barbershops that operate in tip-heavy environments.
If passed, the legislation would:
Beauty service businesses that could be included:
This expansion reflects an ongoing effort to acknowledge the financial contributions of tipped workers beyond the restaurant space, while also giving employers a chance to reduce tax burdens.
If you employ W-2 workers in a tipping-based beauty or personal care setting, you may be eligible for the FICA Tip Credit if the bill passes. That said, official qualification details are still pending.
💡 Note: The U.S. Treasury has been instructed to issue a full list of covered job roles within 90 days of the bill’s enactment. This guidance will help define which businesses can file under the expanded rules. Want updates as soon as they drop? Follow us on social media.
While the expansion hasn’t taken effect yet, you can still take steps to prepare:
Whether you manage a spa, salon or a high-volume restaurant, Anchor Accounting provides full-service tax credit support — from eligibility checks to audit-ready filings. Our FICA Tip Credit Program includes:
As the rules change, we stay ahead of the curve so you don’t have to.
The expansion is still in progress, but if you run a food or beverage business, you could be eligible for the FICA Tip Credit today. Anchor can help you file with confidence and potentially recover thousands in past payroll tax overpayments.
