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Provision known as “45b” helps small business barbershops and salons facilitate worker tips, and complements Trump’s No Tax on Tips provision
In addition to ending the tax on tips, the Big Beautiful Bill signed into law on July 4 delivers yet another win for taxpayers and small businesses: It expands the “45B” FICA Tax Tip Credit to barbershops and salons.
This credit was previously only available to restaurants and bars. The Big Beautiful Bill law expands it to barshershops and salons across the country.
This is a simple fix that helps facilitate tips for workers and gives small businesses much-needed relief from unfair tip taxes. It protects them from being taxed on funds they did not actually receive.
Small business operate on tight margins and this provision will help them keep the lights on.
What is the 45B FICA Tax Tip Credit?
The 45B FICA Tax Tip Credit signed by President Trump allows barbershops and salons to claim a credit for the FICA taxes they pay on worker tips. This means small business owners will no longer be forced to pay taxes on money they never touch.
Before this bill was enacted, when customers used a credit card to tip their barber or stylist, the business owner got stuck paying taxes on the full amount charged on the card, even though the owner never received the tip portion, as the tip goes directly to the worker.
What Main Street is Saying About the 45B Fix
Below are testimonials from real small business owners who supported expansion of the 45B FICA Tip Tax Credit beyond restaurants:
In advocating for the new provision, Paola Hinton, owner of Five Senses Spa, Salon & Barbershop in Illinois, said:
“A $20 tip, which my business does not keep, ends up costing me about $2.24 in taxes.”
Rachel, a small business owner who testified for the new provision at a House Ways and Means Committee field hearing in Peachtree City, Georgia, said:
“When customers add tips to a card, we get taxed on that full amount, even though it goes straight to our stylists. It’s not income I ever touch.”
“I’m not asking for special treatment. I’m asking for fairness. Restaurants get the 45B credit. Why shouldn’t salons and barbershops?”
Archie Todd Currie, owner of five Sport Clips locations in South Carolina, emphasized the potential benefits:
“As a South Carolina salon owner, it’s hard to reconcile why our highly-tipped industry doesn’t have access to same tip credit as our restaurant neighbors. This credit would keep needed funds in my business and in turn be a huge benefit to my hard-working employees.”
The Big Beautiful Bill just solved the problem raised by the small business owners.
According to recent industry data, the United States is home to approximately 109,589 barbershops as of May 2025, with the majority being independently owned establishments. In addition, there are over 86,000 hair salons nationwide, contributing to a combined market size of $60.4 billion in 2025. This vast network of salons and barbershops represents a significant segment of the small business economy, employing hundreds of thousands of professionals across the country.
Expansion of the 45B FICA Tax Tip Credit is a commonsense fix for barbershops and salons, and it will help small businesses avoid being taxed on money they never receive. It complements President Trump’s no-tax-on-tips fulfillment.
