What the “No Tax on Tips” Change Means for Hairdressers in 2025
If you’re a hairdresser, nail technician, or work in a beauty-service business, you likely rely on tips as a meaningful part of your income. The good news is that a major federal tax change is on its way that could reduce how much tax you owe on tips when you file next year.
What’s Changing
Beginning in the 2025 tax year, a new law allows eligible service-industry workers in tipping occupations to deduct up to $25,000 of tips from their federal taxable income. The legislation defines “qualified tips” as cash tips received in occupations that traditionally and customarily received tips before the end of 2023.
For beauty professionals such as hairdressers, estheticians, and nail techs, this means the tips you earn could now be treated differently—potentially giving you more of your hard-earned income to keep.
Who Qualifies and What to Know
Here are the key points to understand:
Your occupation must be recognized as a “customarily tipped” profession, which includes most beauty-service roles.
You must receive and properly report tips in the course of your employment, whether you’re an employee or independent stylist.
The benefit applies to tips earned beginning January 1, 2025, and will be available when you file your 2025 return in 2026.
The deduction may phase out for higher-income earners and is currently scheduled to sunset after 2028 unless extended by Congress.
Why This Matters for Beauty Professionals
For many in the beauty industry, tips make up a significant portion of income. By reducing the taxable amount, you could pay less in federal income tax on those earnings—keeping more of what you make.
It also gives you a chance to plan ahead:
Additional take-home pay can be reinvested into your business for marketing, tools, or education.
Better bookkeeping and tip tracking will help you maximize the benefit and avoid any reporting issues.
If you operate independently, this may also affect how you manage quarterly tax payments or estimated taxes.
Action Steps You Can Take Now
Document your tips carefully. Track cash, card, and digital payment tips to ensure accurate reporting when filing.
Confirm your role qualifies. Hairdressers, barbers, nail techs, and similar service professionals are expected to be included.
Talk with your CPA. A tax professional can help you understand how this change impacts your federal and Georgia state taxes.
Prepare for filing early. Make sure your W-2 or income records reflect your tip income correctly.
Plan for the extra cash flow. If you’ll owe less tax on tips, consider setting aside a portion for savings or business investments.
Final Thoughts
The “No Tax on Tips” change is a meaningful step for beauty professionals who rely on gratuities. For hairdressers and salon owners alike, it’s a chance to keep more of what you earn and better manage your income.
If you want to understand how this new law affects your personal or salon finances, the team at Walker Financial Solutions can help you make sense of the changes and plan ahead with confidence!