Three payroll changes worth knowing about, one of which is worth looking back at.
The Section 45B Tip Credit Is No Longer Food And Beverage Only
If you run a salon, a barbershop, or a nail or spa business, there is a payroll tax credit you are probably not claiming. The section 45B tip credit used to be food and beverage only. For tax years beginning after 31 December 2024 it permanently covers barbering and hair care, nail care, esthetics, and body and spa treatments. It is claimed on Form 8846, and it is worth looking back at.
The tips deduction has two traps
On the employee side, the qualified tips deduction runs from 2025 through 2028, up to $25,000 a year, reduced as modified adjusted gross income passes $150,000, or $300,000 filing jointly. It covers cash tips only, in occupations customarily tipped on or before 31 December 2024, so automatic gratuities and mandatory service charges do not qualify. And the final regulations, effective 12 June 2026, require reporting the recipient's occupation — which means your payroll records need to carry something they probably do not carry today.
Wage floors are state law and they move every January
New Jersey, for example, is at $15.92 general minimum from 1 January 2026, with a tipped cash wage of $6.05 against a maximum tip credit of $9.87, and separate rates for small and seasonal employers, agriculture, and long-term-care direct care. If you have staff in more than one state you have more than one set of these, and they do not change on the same schedule.
This post is general information about federal and state tax rules, not advice about your situation. Rules change. Check the date above before you rely on anything here, and talk to us about your own facts.