do hair salons qualify for FICA tip credit

Did You Claim the Tip Credit on Your 2025 Tax Return?

Tracy Stevens | 05.26.26

As a hair salon owner, you should be claiming the FICA Tip Credit beginning with your 2025 tax return. Yet this year, many salon owners were incorrectly told they didn’t qualify. In a world where AI-generated tax misinformation spreads quickly, we’ve been working hard to help salon owners separate fact from fiction.

If you filed your 2025 return, take a moment to look for Form 8846 in your S corporation, partnership, or individual return. If that form is missing, and you meet the qualifications below, you may have left money on the table.

Who Qualifies for the Tip Credit?

Here are the actual IRS requirements, simple, straightforward, and often misunderstood:

You have employees who receive tips: stylists, assistants, front desk, or any employee who receives customer tips.
Those employees report their tips to you typically through payroll or your POS system.
You pay employer FICA taxes on those reported tips, this is the tax the credit is based on.
The tips are received from customers for services – not service charges, not booth rent, not owner draws.
You operate as a business that provides services where tipping is customary, hair salons clearly qualify.

And importantly:

There is no minimum or maximum amount of tips required.
There is no minimum number of employees.
There is no revenue threshold.

If you have even one employee who receives one dollar in tips and you pay FICA on it, you may qualify.

Why This Matters for Salon Owners

The tip credit is one of the most valuable tax credits available to service‑based businesses, and one of the most overlooked in the salon industry. For many salons, the credit can reduce tax liability by hundreds to thousands of dollars per year.

Yet we’ve seen:

Returns filed with no Form 8846
Owners told they “don’t qualify”
Confusion between booth renters and employees
AI‑generated explanations that are simply wrong

If you’re unsure, that’s exactly why we’re here.

What You Should Do Next

Pull your 2025 tax return
Look for Form 8846 in your S corporation, partnership, or individual return.
If it’s missing, and you have tipped employees, reach out to us so we can review your eligibility.

We want every salon owner to be properly educated, properly supported, and properly credited for the taxes you’re already paying.

Meet the author

Tracy Stevens

Tracy Stevens is a leader in business advisory services, specializing in tax, consulting, and outsourced solutions with a focus on the salon industry. Having grown up in a family business, she deeply understands the unique challenges faced by small businessowners. Tracy is passionate about helping clients navigate their accounting and tax needs while learning the intricate details of their businesses and how they’ve evolved over time. She finds fulfillment in building strong relationships and contributing to the success of her clients.