Salon Success Secrets

Everything A Salon Owner Needs To Know About One Big Beautiful Bill Act

• Lindsay Lowe & Jen Booth

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Salon owners can now claim the FICA tax tip credit, a dollar-for-dollar tax credit on payroll taxes paid on team tips that was previously only available to restaurant owners. This new legislation through the One Big Beautiful Bill Act gives salon owners the opportunity to redirect thousands of dollars back into their businesses or personal wealth development.

• Dollar-for-dollar tax credit on the 7.65% employer portion of payroll taxes paid on reported tips
• Example calculation: $150,000 in annual reported tips equals $11,475 in potential tax credits
• Real example shared of a salon owner receiving a $31,850 tax credit used as down payment on rental property
• Tax credit creates opportunity to move from E/S quadrants to B/I quadrants in Robert Kiyosaki's Cashflow Quadrant
• Four steps to claim your credit: report all tips, ensure W-2 classification, file IRS Form 8846, train team on proper tip reporting
• Team members can still receive up to $25,000 in tax-free tips annually

Text BILL to 469-283-5590 for a free step-by-step checklist on how to claim your credit and start building wealth.


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Speaker 1:

Hey salon owners, today's episode is going to change the way you look at taxes forever. Yes, I said taxes, but don't worry, this isn't boring. It's actually brilliant because something big just happened and it's finally putting our industry on the map where it belongs.

Speaker 2:

Yeah. So if you're someone who's ever said I want to take care of my team, but tips are killing me and taxes stick with us, you're about to get a dollar for dollar win, so let's dive in, love it.

Speaker 1:

Okay so picture this here's a restaurant, you know, and then here's a salon. Okay so have you ever wondered why restaurants have been rewarded by the government for tipped wages for decades, but salons were just left out? You guys, it wasn't because our industry didn't matter, isn't because our industry didn't matter, it was because no one stood up and said what about us until now?

Speaker 2:

Yeah, so, if you know this, restaurants for years have benefited from something called the FICA tax tip credit. And here's how it worked. You know, restaurant owners had big tax savings on the other side of salon owners, like Lindsay was saying earlier, zero, zero, zero, zero, no tax savings. So every time a server reported tax, the restaurant got a credit on their taxes. But for salon owners at the time, nope, you paid 15.3% in payroll taxes on every dollar your team earned in tips and got nothing back in return until now.

Speaker 1:

Yeah, because you guys, this new legislation, the one big beautiful bill act, finally extends the tax credit to you. So let me say that again You're now eligible for a dollar for dollar tax credit on the payroll taxes you pay on your team's tips. That's not hype, that's the law you know. So if you've ever thought tips are just too expensive as an employer, go ahead and toss that belief, because what used to cost you thousands can now put thousands back into your pocket.

Speaker 2:

Yeah. So let's think of this from two different salon owners. We're going to paint this picture of you. We're going to have Ashley and Maya. So we got Ashley and Maya. You know both salon owners and both heard about this new tax credit, right? So Ashley, on one hand, meant to follow up. She bookmarked the email that this big, beautiful bill was launching. She was busy, but she said, oh, I'll get back to it later, come April. She owes more than she thought and she's frustrated. But Maya, she got coached, she filed correctly and received a $31,850 tax credit. Let me say that again, a $31,850 tax credit. And the most amazing part of this is she used it as a down payment on her first rental property.

Speaker 1:

Yeah, I love that. I love that picture that you're painting, jen, you know. So let's just go ahead and fast forward 10 years. You know, maya owns now four rental properties and her salons run themselves and she is now in the investor quadrant. You know, her money is working while she's sleeping and Ashley, she's still doing payroll. She's asking herself why am I not further ahead? But the difference wasn't effort, it was action. You know, and I think if you're not familiar with how you get to the I quadrant, uh, one of our favorite books, um, who our mentor, jane, has been credited working with for years, is Robert Kiyosaki is rich dad, poor dad. He really dives into you, really dives into how you move from the E to the I part of the investor quadrant, to where at one point you're employed, then self-employed, then you have a business and then investor is that quadrant. And so when you move into that investor quadrant, that's when magic really starts multiplying and happening inside of your life. And we coached to this inside of salon business school all the time.

Speaker 2:

Yeah. So, like, just remember this like, the IRS is offering you money. So you got two choices you can either grab it or leave it on the table for someone else to take. And we're not talking about a cute little bonus, we're talking, actually, about a wealth building money. Now, for some of you might be wondering well, how much is this really worth for me? And so let's do some quick math together.

Speaker 2:

If you want to write this down, this will be a great exercise for you to go do so. You first want to pull a tip report from your payroll system or POS, your CRM, whatever it may be, and add up the total reported tips for the year for your employees. Now you want to multiply that number by 7.65%, and you're like Jen, what does that number mean? This is the employer portion of social security plus Medicare taxes that you paid, and that number that's your potential tax credit, dollar for dollar. So let's say your team reported $150,000 in tips last year. Yeah, my calculator. Do some quick math. So that'd be 150,000 times you know the 7.65%, 65%, which equals $11,475.

Speaker 1:

That's $11,475 back in your pocket every year. And this is just the beginning. I love that. If you're excited I'm you know this is such a great thing to be able to share with another salon owner. Send them the link to this podcast now.

Speaker 1:

But here's what you'll need to do next. You know the first thing that you want to do is make sure that you're reporting all employee tips, including digital tips. The next thing that you want to do is make sure your team is W2. So this is, you know, hourly or commission base. If you're 1099, you're out on this one.

Speaker 1:

We would love to have a conversation with you how to move into a direction where you're running a business. So feel free to reach out to us if you want to make that switch. The next thing that you'll want, then, is file that IRS form 8846 through your CPA or payroll provider. So that's something you're going to want to reach out to your CPA or your payroll provider right away to start getting the ball rolling there. The fourth thing that you want to do is make sure you're training your team to report tips properly. You know, because they still get to keep up to $25,000 in tax-free tips per year. So communicate that with them. Make sure that they're properly reporting tips, make sure that they're clocking in and out, cause you'll need that to be compliant with everything. Um, you know, because you might be worried, hey is my team going to freak out? You know we got you. You know we'll help you explain it in a way that builds trust instead of fear.

Speaker 2:

Yeah. So let's zoom out when think to yourself, like what would you do with an extra 10,000, 20,000, or even $30,000 a year? You know, lindsay, was mentioned the cashflow quadrant, esbi, and you can stay in E or S, which is exchanging time for money, or start investing, and this tax credit is the bridge that can take you there.

Speaker 1:

Yes, you know. Yes, We'll help you prepare, yes, We'll help you talk to your team, but more than that, we'll help you use this money strategically to build real wealth. So in 2035, you're not still asking what if I had started back then? You know, let's pick the path that leads to freedom. You're right on time. Freedom, you're right on time. So if, if, if this has spoken to you, if you're ready to claim your credit and make it count. Text the word bill, that's B I L L to four, six, nine, two, eight, three, five, five, nine zero. And did I say two, six, three? I meant two, eight, three. So that number is four, six, nine. Two, eight, three, five, five, nine, zero. With the word bill B I L L and Wilson, you are free step-by-step checklist.

Speaker 2:

Yeah, cause this is your moment to stop surviving and start building something that lasts. So until next time, keep growing, keep leading and keep building that beautiful legacy Salon Success Secrets. We're out and we'll see you next time.