UPDATED NOTES!

Laws have been updates since this was recorded. Important updates are time stamped:

7:36     Start discussion about $25k tip income deduction.

10:52   Reminder that laws are still being written.

11:35  Reminder that this is a Federal law, States may or may not do something, FICA still applies. Must file joint return if single.  NEW – must have income to take deduction

15:10   Shift to owner’s discussion.

15:58  Could be eligible for $50k if both have tip income.  NEW - We now have law that says it will be limited to $25k per return.

16:56  NEW - 1993 FICA tip tax credit started for restaurants.  Originally it was indicated as early 80s.

20:34  FICA Tip Tax Credit is the amount paid and will get back what paid.  CLARIFY – If not paying tax, may be carried back 1 year and/or carried forward a max of 20 years. Treated like other general credits so there are many different factors based on the personal taxpayers’ situation.  This is a FICA tax credit – not a state deal. 

Tax talk that actually puts money back in your pocket starts here. We sat down with April McDaniel of Kopsa Otte to decode the new rules on tips for the beauty industry and map out simple steps that protect your income, benefits, and long-term security. From why 100% of tips must be reported to how the new incentives work, we connect the dots so employees and owners can act with confidence.

First, we break down the $25,000 employee tip deduction: who qualifies, how to document tips correctly on a W-2, what “modified adjusted income” means for phaseouts, and why FICA still applies. We also cover special cases like self-employed artists keeping separate tip records, married filing status pitfalls, federal versus state differences, and the 2025–2028 window that makes this a timely priority. The message is clear: clean records now lead to smoother filings and bigger benefits later.

Then we shift to the owner’s playbook. April explains how the long-standing FICA tip credit, claimed on Form 8846, now applies to salons and spas. We detail the payroll and reporting steps that unlock the credit, when minimum wage rules limit eligibility, and how the credit flows through for S corps and partnerships. You’ll hear practical policies that eliminate off-book cash and app tips, ways to leverage salon software for accurate reporting, and a simple compliance framework that stops leaving money on the table.

This conversation champions a mindset shift: tips are not coffee money, they are real income that should fund goals, build credit, and secure benefits. If you’re ready to level up your business, align your team, and claim what the law now offers, this is your roadmap. Subscribe, share with your team, and leave a review to help more beauty pros grow smarter and stronger.

Find out more about April and Kopsa Otte at h

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The Beauty Business Strategies Podcast is designed to give salon, spa, medspa, barbershop, and lash studio owners, just like you, quick tips to make more money, inspire your team, and create world-class client experiences.