No Tax on Tips for Hairstylists: 2025 Tax Deduction Rules
Small-Business Columnist · 7/8/2026
As a small business owner, I've seen firsthand the benefits of the No Tax on Tips deduction for hairstylists and makeup artists. This deduction reduces federal income tax on qualified tips, but FICA still applies. For tax years 2025#28, hairstylists and makeup artists can take advantage of this deduction, but it's essential to follow the rules.
Is the No Tax on Tips Deduction Available for Hairstylists?
According to the IRS, the No Tax on Tips deduction (OBBBA) is available for hairstylists and makeup artists in tax years 2025#28. To qualify, they must report tips of $20+ per month to their employer, which will then report the tips in W-2 Box 14b, using the Treasury Tipped Occupation Codes (TTOC). For more information, visit https://www.irs.gov/forms-pubs/about-obbba.
As a hairstylist or makeup artist, you're considered a tipped employee and must follow the same reporting rules as servers and bartenders. You must report tips to your employer on a monthly basis, and they'll report the tips in W-2 Box 14b. For example, if you earn $10,000 in qualified tips and report $5,000 to your employer, you can claim the No Tax on Tips deduction for the reported $5,000, reducing your federal income tax burden.
Practically speaking, it's essential to keep accurate records of your tips and report them to your employer on time. I've seen many hairstylists and makeup artists struggle with unreported tip income, which can lead to penalties and additional tax liability. To avoid this, make sure to report your tips accurately and on a timely basis.
- Hairstylists and makeup artists must report tips to their employer on a monthly basis.
- Employers report tips in W-2 Box 14b, using the Treasury Tipped Occupation Codes (TTOC).
- Form 8027 is used for large food/beverage establishments, not hairstylists.
- The deduction phases out above $150,000 Modified Adjusted Gross Income (MAGI) for single filers.
- For married filing jointly, the phase-out starts at $300,000 MAGI.
- The deduction caps at $25,000 of qualified tips per year.
If you fail to report tips, you may be subject to penalties and must report unreported tip income on Form 4137. To avoid penalties, it's essential to accurately report tips to your employer.
Key Takeaways
Key takeaways
- Hairstylists and makeup artists can benefit from the No Tax on Tips deduction available for tax years 2025#28.
- The deduction reduces federal income tax only, but FICA (7.65%) still applies to tips.
- Hairstylists and makeup artists must report tips of $20+ per month to their employer.
Frequently Asked Questions
What is the Treasury Tipped Occupation Codes (TTOC)?
The Treasury Tipped Occupation Codes (TTOC) are used by employers to report tips in W-2 Box 14b.
What is Form 4137?
Form 4137 is used to report unreported tip income and may be subject to penalties if not accurately reported.
What is the deadline for reporting tips?
Hairstylists and makeup artists must report tips to their employer on a monthly basis, and employers will report the tips in W-2 Box 14b by January 31st of each year.
What is the No Tax on Tips deduction?
The No Tax on Tips deduction reduces federal income tax on qualified tips, but FICA still applies.
| Employer | Hairstylist/Makeup Artist | Tip Reporting |
|---|---|---|
| Yes | Monthly | Report $20+ per month |
| No | N/A | N/A |
For more information on the No Tax on Tips deduction, visit the IRS website at https://www.irs.gov/forms-pubs/about-obbba.
This article provides general information on the No Tax on Tips deduction and is not intended to be tax advice. Consult a tax professional for specific guidance on your individual situation.