Can Salons and Barbershops Claim the FICA Tip Credit?

Yes, if tipping is customary for the services your employees provide. For tax years beginning after 2024, the FICA tip credit (Internal Revenue Code section 45B, claimed on Form 8846) covers the employer Social Security and Medicare taxes paid on tips for barbering and hair care, nail care, esthetics, and body and spa treatments, not only food and beverage service.

7.65%On Form 8846, the credit is 7.65% of creditable tips.
$7.25For beauty services, tips that only make up the difference between the wages you pay and the $7.25 an hour federal minimum wage are not creditable.
$5.15Tips used to meet the federal minimum wage do not count: the beauty-service rate is $7.25 an hour, and the food and beverage rate in the form is $5.15 an hour.

Salons, barbershops, nail studios, spas, and similar beauty businesses can claim the FICA tip credit when they meet the rules. The credit (Internal Revenue Code section 45B) gives an employer a general business credit for the employer share of Social Security and Medicare taxes it pays on employees' tips. It used to apply only to food and beverage businesses. Public Law 119-21 extended it, for tax years beginning after 2024, to tips received for barbering and hair care, nail care, esthetics, and body and spa treatments when tipping is customary for those services. On Form 8846, the credit is 7.65% of creditable tips. For beauty services, tips that only make up the difference between the wages you pay and the $7.25 an hour federal minimum wage are not creditable. You claim the credit on Form 8846 or, for some owners, directly on Form 3800.

Last checked: November 6, 2026. This page explains the rules only. It is general information, not legal, tax, or financial advice.

The short version

This is a credit for the employer. It is separate from any deduction a stylist or barber may claim on their own tips.
It covers employer Social Security and Medicare taxes paid on tips for barbering and hair care, nail care, esthetics, and body and spa treatments, if tipping is customary for those services.
The beauty-service expansion applies to tax years beginning after 2024. Food and beverage employers have long been eligible.
Tips used to meet the federal minimum wage do not count: the beauty-service rate is $7.25 an hour, and the food and beverage rate in the form is $5.15 an hour.
The credit is part of the general business credit.
You cannot also deduct the same employer taxes. The instructions tell you to reduce your income tax deduction for them by the credit amount.

Who qualifies

An employer with employees who receive tips from customers for barbering and hair care, nail care, esthetics, or body and spa treatment services, where tipping of the employees providing those services is customary.
The employer must have paid or incurred employer Social Security and Medicare taxes on those tips during the tax year. The form is about employees' tips, so it depends on how your workers are classified and paid. Ask a tax professional about your setup.
Only tips for services in those lines of business count. Tips outside them are not part of this credit.
Partnerships and S corporations must file Form 8846 to claim the credit. Their owners can report their share directly on Form 3800, Part III, line 4f, without filing Form 8846 themselves if that is their only source of the credit.

How the credit is figured

Form 8846 works in a few steps. Line 1 is the tips employees received for services on which you paid or incurred employer Social Security and Medicare taxes. Line 2 is the part of those tips that is not creditable. If you pay a beauty-service employee wages (excluding tips) of at least $7.25 an hour, you enter zero on line 2. If you pay less, you work out the non-creditable amount month by month for each employee, using the difference between what $7.25 an hour would pay and the wages you actually paid. Line 3 is line 1 minus line 2, the creditable tips. Line 4 multiplies line 3 by 7.65%. If an employee's wages and tips are above the Social Security wage base for the year, the instructions have a separate computation for that employee.

How to get it

How to get started

Confirm that tipping is customary for the services your staff provide and that they fall within barbering and hair care, nail care, esthetics, or body and spa treatments.
Pull payroll records that show employees' tips and the employer Social Security and Medicare taxes you paid on them.
For each employee and each month, compare the wages you paid (excluding tips) with what the federal minimum wage of $7.25 an hour would pay. If you pay at least that, the form says to enter zero on line 2.
Complete Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips. Partnerships and S corporations file it. Other owners report the credit from a partnership or S corporation on Form 3800.
Reduce your income tax deduction for employer Social Security and Medicare taxes by the line 4 amount.
Keep your records. You can claim, or choose not to claim, the credit within 3 years of your return's due date on an original or amended return. Talk to a tax professional before amending.

Programs that may match

Look beyond this credit

Compare another employer creditthe small business health care tax credit.If you are hiring, see the Work Opportunity Tax Credit rules for 2026 hires.See what else Public Law 119-21 changed for small businesses.Browse how to find tax credits and incentives your business may use.Find other programs you may qualify for with FundPlenty's free match at fundplenty.com.

FAQ

Can salons and barbershops claim the FICA tip credit?

Yes, if they meet the rules. For tax years beginning after 2024, section 45B covers employer Social Security and Medicare taxes on tips for barbering and hair care, nail care, esthetics, and body and spa treatments, where tipping of employees providing those services is customary. You claim it using Form 8846.

Which beauty services count for the FICA tip credit?

The law lists barbering and hair care, nail care, esthetics, and body and spa treatments, if tipping of the employees providing those services is customary. Tips for other kinds of services are not part of this credit.

How much is the FICA tip credit?

Form 8846 multiplies creditable tips by 7.65%, which matches the 6.2% Social Security and 1.45% Medicare employer rates. If an employee's wages and tips exceed the Social Security wage base for the year, the instructions use only the 1.45% Medicare rate for the part above that base. The draft 2026 instructions list a 2026 Social Security wage base of $184,500. The amount of credit you get depends on your own tips and payroll.

Does the credit apply to tips from past years?

The beauty-service expansion applies to tax years beginning after 2024. The IRS says you can claim, or elect not to claim, the credit within 3 years of the due date of your return, on an original or amended return. Ask a tax professional about your situation.

Is this the same as the no tax on tips deduction?

No. The FICA tip credit is an employer credit for payroll taxes the employer paid. The IRS describes the no tax on tips deduction as a separate individual deduction for qualified tips, up to $25,000 a year for 2025 through 2028, subject to income limits.

Can I also deduct the employer taxes I used for the credit?

No. The law denies a deduction for any amount taken into account in figuring the credit, and the Form 8846 instructions tell you to reduce your income tax deduction for employer Social Security and Medicare taxes by the line 4 amount.