FICA Tip Credit Goes Beyond Restaurants

By: M. Scott Morris
Published: August 27th, 2025

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, brings a long-awaited update to the FICA Tip Credit. For the first time, businesses beyond restaurants, including salons, barbershops, spas, and wellness franchises, can benefit.

Writing for citrincooperman.com, Kevin Sawler explains what this change means for franchise operators:

• Who qualifies? Any business in an industry where tipping is customary, such as beauty and wellness, can now claim the FICA Tip Credit.
• How does it work? Employers receive a credit equal to 7.65% of reported tips that exceed minimum wage thresholds. This offsets the payroll taxes they've already paid.
• What savings can be expected? A 20-location salon franchise reporting $50,000 in annual tips per location could see $76,500 in annual tax savings.
• How is it estimated? Sawler notes that franchisees can look at their prior year Form W-3, take the total of line 7 (Social Security tips), and multiply by 7.65%. That's a quick way to estimate this year's credit.
• Why does it matter? Unlike many OBBBA provisions that sunset after 2028, this expansion is permanent, offering long-term planning certainty.
• What's the bottom line? If you operate in the beauty, hair, or wellness space, now is the time to check your eligibility. "Tax credits are often nuanced and difficult for nontax professionals to understand, but this one is fairly straightforward," Sawler writes.

For more information, see Sawler's post here.

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