posted on: 09/05/2025
The tip tax break is here! Over Labor Day weekend, US Treasury Secretary Scott Bessent made it official: Cosmetologists, barbers, hairstylists, estheticians, skin professionals, massage therapists, manicurists, and nail techs made the cut for a tax break on tips, starting this year.
Beginning with the taxes you file in 2026, you can deduct up to $25,000 in tips from your federal income tax. This means you take more money home for the next few years. The tax break isn’t forever, at least not yet. It is currently scheduled to phase out after 2028, but that could change if federal lawmakers decide to extend it.
We have been hearing about tax tip exemptions for years from both sides of the aisle. It is a universally popular measure with bipartisan support that many politicians made a cornerstone of their campaigns. The “how” was a major point of contention between parties, but now we have some answers.
Here's what you need to know about this tax break:
- You still are required to report tipped income. The difference is that you can deduct it from your federal income tax.
- It only applies to those of certain professions (you are included!) who make less than $150,000 per year or less than $300,000 per year filing jointly.
- You still will pay Social Security and Medicare taxes on your tips.
- If you make over $25,000 in tips in a tax year, anything over that threshold will be subject to federal tax.
- If you hold multiple jobs that receive tipped income, your other job might not qualify for the tax break. Check the IRS and Treasury’s ruling in the Federal Register to make sure the jobs you have are eligible for the exemption.
What Happens Now?
There is a public comment period during which you can make your support for the provision known. The federal government will have an open period for public comments on the newly issued guidelines for the tax break before they can be made official. Continue recording your tipped income so you can report it in your annual taxes in 2026. Consult a tax professional to make sure you understand the right way to report and how this change could impact you and your family.
Keep an eye on your email for instructions from Associated Hair Professionals (AHP) on how to express your support and put your comments on the record for this historic change to federal tax policy. More money for our members? That’s something we can all get on board with.