Huge Tax Breaks for Nail & Beauty Pros: What Trump’s ‘Big Beautiful Bill’ Means for You

July 17, 2025 Huyen Ho

On July 4, 2025, President Trump signed what he calls the “One Big Beautiful Bill” into law — a sweeping 900-page piece of legislation that touches nearly every corner of the economy: taxes, healthcare, defense, immigration, and more.

And for the beauty industry, it introduces major changes with real financial benefits. This bill includes a federal income tax deduction for service-based professionals who earn tips and work overtime — and an expansion of the 45B FICA Tip Tax Credit for employers in the beauty and personal care industry.

Here’s exactly how this bill could put more money back in your pocket — and how to take advantage of it:

No Tax on Tips (Up to $25,000 a Year!)

If you’re in a profession where tips are standard — like nails, lashes, hair, or massage — the new law lets you deduct up to $25,000 of your reported tips from your taxable income.

For self-employed individuals, the deduction may not exceed your net income (before this deduction) from the business where the tips were earned.

That’s real money in your pocket — not the IRS’s.

What counts:

Voluntary cash or card tips received directly from customers or through tip pooling
Tips reported on W-2, 1099, or Form 4137

Who qualifies:

Workers in tip-based jobs (full list to be released by the IRS in Oct 2025)
Employees or self-employed (excluding certain high-income business categories)
You must report your income properly and file taxes using your Social Security Number
Married? File jointly to claim the full deduction

Phaseout alert: The deduction begins to phase out if your modified adjusted gross income (MAGI) exceeds $150,000 (or $300,000 for joint filers). Under that? You’re golden.

No Tax on Overtime Pay Either?! Yes, Please.

Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” portion of “time-and-a-half” compensation – that is required by the Fair Labor Standards Act (FLSA) and reported on a Form W-2, Form 1099, or other specified statement.

Example:

Your regular rate is $20/hr.
Your OT rate is $30/hr.
That extra $10/hr (the “half” part) is deductible — up to $12,500 per person, or $25,000 for joint filers.

Who qualifies:

Must be hourly and receive legally required OT pay
Must have OT pay reported on a W-2 or 1099
Same income limits and filing requirements as the tip deduction
Deduction is available for both itemizing and non-itemizing taxpayers

What employers must do:

File information returns with the IRS or SSA
Furnish statements to taxpayers showing total qualified overtime compensation

Booth Renters = Small Business Owners + 20% QBI Deduction

The Section 199A deduction (QBI deduction) allows non-corporate pass-through business owners to deduct up to 20% of qualified business income. This deduction was set to expire in 2025 — but under this new law, it’s now permanent.

If you rent a booth, suite, or station in a salon, the IRS considers you a small business — and you can claim this deduction.

What qualifies:

Booth/studio rent
Supplies, education, licensing
Tools, equipment, apps, marketing

Even if you don’t own the salon — you’re still eligible. Just file as a sole proprietor or single-member LLC and keep good records.

New FICA Tip Tax Credit for Salon Owners

For the first time ever, salons, spas, and barbershops that employ W-2 staff can claim a dollar-for-dollar tax credit on the employer-paid FICA taxes for employee-reported tips.

Restaurants have had this since the 1990s — now, the beauty industry finally gets equal treatment.

Why this matters:

Employers can recover payroll taxes paid on income they don’t keep
Improves cash flow and supports reinvestment in staff, training, and business growth
Accurate tip reporting will be essential to calculate and claim this credit

Benefits:

Credit equals employer share of Social Security & Medicare taxes paid on tips
No cap — works like daycare or restaurant tax credits
Example: If your team reports $100,000 in tips, you could save over $7,000 in payroll taxes

What You Should Do Now

Whether you’re a nail tech, a salon owner, or somewhere in between, here’s how to get ready:

Track Your Tips and Overtime. Encourage your team to report tips accurately. Use payroll software or systems that capture tip income and overtime cleanly.
Get Professional Tax Help. These deductions and credits are powerful — but you’ll want a licensed accountant who understands salon business structures.
Talk to Your Staff. Transparency about reporting and taxes helps everyone benefit.
Watch for IRS Updates. The list of qualifying tipped occupations comes out by October 2, 2025.