A single $20 credit-card tip historically cost Five Senses Spa, Salon & Barbershop in Peoria, Illinois, roughly $2.24 in employer-side taxes. Over 20 years, the business paid out more than $2.3 million in tips and absorbed over $176,000 in FICA taxes on money it never kept. Owner Paola Hinton laid out those figures in an August 2026 statement explaining what the Working Families Tax Cut's Section 45B provision now changes for her business.

The 45B extension gives beauty industry employers the same FICA tip credit treatment restaurants have held for decades, offsetting payroll taxes on tipped income. It sits alongside the No Tax on Tips provision and permanent full business expensing in the broader package.

Angie Katsanevas, founder of Utah-based Lunatic Fringe Salons, put the mechanics on the record in January 22, 2026 testimony before the U.S. House Small Business Committee: "This new provision, passed as part of the One Big Beautiful Bill Act, provides an above-the-line deduction of up to $25,000 for qualified tips received by both W-2 employees and 1099 contractors, effective in tax years 2025–2028. The provision also extends the employer-side FICA credit under Section 45B to beauty and salon services."

What the Numbers Show in Operating Salons

At Gratitude Spa & Salon in Bismarck, North Dakota, owner Kristin Chorne told the House in February 24, 2026 testimony that her salon took in $160,000 in tips in 2025. Her average full-time employee earns between $11,000 and $25,000 a year in tips. Chorne said she emailed her senators and representative when the bill was introduced because the beauty industry was not originally included in the no-tax-on-tips policy.

"We have an all-female staff—lots of single moms, single females just starting out, and I'm hearing amazing stories as a lot of them have already filed their taxes and are not paying in this year," Chorne said. "They're getting a great return that they can put to use in real life."

Darcy Mahalik, owner of Garbo's Salon and Spa, which operates statewide throughout Nebraska, reported a concrete outcome in May 20, 2026 testimony to the House Ways and Means Committee: one employee used her additional refund to pay off more than $4,000 in high-interest medical debt.

Stacey Tyree, a Great Clips employee in Green County, Tennessee, described a similar shift in April 15, 2026 testimony. After years of owing at filing, her refund allowed her to enroll her husband as a dependent on her health insurance — "for the first time in his entire adult life, he is fully covered on medical."

The Ownership Side: Expansion Capital and Hiring

Jesse Keyser, a franchise small business owner based in St. Louis, Missouri, employs about 400 tipped employees, primarily in salons. In May 8, 2026 testimony published by the House Ways and Means Committee, he quantified the compounding effect: the FICA tip credit generates enough savings to support building one new salon per year, and each new location creates roughly 10 full-time jobs paying $65,000 or more annually.

"When we do build, bonus depreciation allows us to reinvest aggressively by reducing the upfront tax burden," Keyser said. "This isn't theoretical. It's higher take-home pay for my employees and real growth and expansion on my end."

At the franchise level, Edward Logan, president and CEO of Sport Clips — a chain with nearly 1,800 franchises nationwide — said in a July 4, 2025 statement published by the Professional Beauty Association that the provisions are "historically impactful" and will make licensed careers more attractive while empowering small businesses to open new locations and hire more professionals.

Hinton said the Five Senses savings will fund employee benefits, education, technology and equipment, calling 45B "an incredibly meaningful victory for our entire industry" after years of advocacy.

A barbershop owner in West Des Moines, Iowa, identified only as John, credited full business expensing in a September 2, 2025 testimonial published by Rep. Zach Nunn with making new clippers, chair updates and apprentice hires affordable. "Tips are earned through hard work, not some bonus," he said. "We shouldn't be taxed twice for doing a good job."

Kem, a cosmetologist in Morgan County, Illinois, said in a September 10, 2026 testimonial published by Rep. Mary Miller that No Tax on Tips "really helps my family's income."

With the tip deduction authorized for tax years 2025 through 2028 and the expensing and rate provisions structured as permanent, salon and barbershop owners now have a multi-year planning window in which to convert tax savings into staffing, build-outs and equipment — the test ahead is whether the expiring tip provisions get extended.