As of July 3rd, 2025, Congress has officially passed the 45B FICA Tip Tax Credit as part of the controversial “big, beautiful bill,” finally providing tax fairness for salon, spa and barbershop owners by allowing employers a dollar-for-dollar tax credit on the employer portion of FICA taxes on employee tips. Earlier today, President Trump signed it into law.
The Professional Beauty Association (PBA) celebrates this moment as a generational victory for the more than 1.3 million professionals who power the beauty industry across the United States. For the first time ever, beauty business employers will receive the same tax credit afforded to restaurant employers since 1993. This change corrects a decades-old tax inequity, through 2028, and delivers long-overdue recognition to an industry made up overwhelmingly of women, diverse entrepreneurs and single-location small-business owners.
“As government affairs professionals, Kati Rapoza and I have spent nearly 15 years working to advance this legislation,” says Myra Reddy, director of government affairs at PBA. “The beauty industry deserves tax fairness and a voice to represent them in Congress. We’re proud to have represented PBA members. Every advocate who stood with us deserves immense gratitude — we did this together.”
Passed as part of the reconciliation package, which, as per NPR reporting, codifies reductions in federal support for Medicaid and Affordable Care Act marketplaces that will cause nearly 12 million more people to be without insurance by 2034 according to Congressional Budget Office estimates (which, in turn, is expected to negatively impact hospitals, nursing homes, and community health centers that rely on that funding), the Section 45B FICA Tip Tax Credit, paired with the new No Tax on Tips deduction for workers, represents sweeping federal tax reform for service-based businesses. It will not only provide financial relief but will also help stabilize and elevate the future of thousands of beauty businesses across the country.
What the 45B FICA Tip Tax Credit Will Do:
- Offset increased FICA liability from higher reported tips
- Free up capital for reinvestment in staffing, training, wages and benefits
- Strengthen women- and minority-owned small businesses
- Encourage accurate and transparent tip income reporting
“This isn’t just a tax credit — it’s a statement,” says Leslie Perry, executive director of PBA. “It says our industry matters. Beauty professionals are job creators, community builders and economic drivers. Finally, the professional beauty industry has achieved tax fairness in our U.S. tax code.” PBA views the 45B FICA Tip Tax Credit’s inclusion as a validation of the industry’s contributions, and a turning point in how Congress views America’s beauty professionals.
The Professional Beauty Industry at a Glance
- Eighty-three percent of industry professionals are women
- Sixty-nine percent of employer businesses are women-owned
- Forty-seven percent are minority-owned
- Ninety-eight percent of salons operate as single-location small businesses
- The industry generates $81.8 billion in annual revenue
In a release, PBA credits “every advocate, business owner, and policymaker who stood firm over the years,” making a point of special thanks to their “partners at the International Salon & Spa Business Network (ISBN) for their commitment and collaboration in helping bring this across the finish line.” Kati Rapoza, PBA government affairs manager, says “ISBN’s leadership, unity, and unwavering support were instrumental in helping our industry speak with one voice. Their partnership elevated this effort in every way, and we’re deeply grateful to stand alongside them in this historic win.” She adds, “we also express special thanks for the invaluable support of Gordon Logan of Sport Clips and Rhoda Olsen of Great Clips, whose dedication and generosity were key to achieving this milestone.”
ISBN President Edward Logan, also CEO of Sport Clips, echoed the significance of this moment for the future of the industry, saying, “The passage of No Tax On Tips and the extension of the employer tip tax credit to the beauty industry is historically impactful for our industry.” He drives home that “licensed hair and beauty services professionals will see an increase in their take-home pay, making these careers even more attractive. Small businesses across the country will be empowered to thrive and reinvest, open new locations, better serve consumers, and employ a greater number of talented professionals.”
To understand the impact of the new law and what’s coming next, join PBA for a live Q&A on their Instagram this coming July 8th at 1PM PST/4PM EST. And for more information, visit probeauty.org.
