A Milestone Event: New Tax Law Supports Salon Owners and Stylists

This year marks a milestone for the haircare industry and for franchisees and service-professionals alike with the passage of H.R. 1—the Budget Reconciliation Law signed on July 4, 2025. At the heart of this change are two game-changing provisions: the expansion of the Section 45B Employer FICA Tip Credit and the new “No Tax on Tips” deduction for licensed professionals.


Historically, only tipped workers in restaurants and food & beverage establishments were eligible for the FICA Tip Credit. The new law extends that credit to salon, spa, and barbershop businesses. Simultaneously, the “No Tax on Tips” provision authorizes an above-the-line deduction for qualified tip income in traditionally tipped occupations, meaning service workers will keep more of what they earn.

Here's why this matters for a franchised hair salon business like Great Clips.

For franchisees, this change is both a tax advantage and a practical boost to everyday operations. The expanded employer credit helps reduce payroll tax burdens for tipped employees, giving salon owners new flexibility to reinvest in what matters most: supporting their teams, improving technology and training, or expanding into new locations.

For stylists and other service professionals, the new “No Tax on Tips” rule means they’ll take home more of what they earn. That’s money that helps pay rent, buy supplies, grow their savings accounts, and support their families. And when stylists feel valued and fairly compensated, it strengthens the entire workforce by improving retention and job satisfaction.

Together, these changes create a stronger foundation for growth. They make it easier for franchisees to build sustainable businesses and for stylists to see long-term opportunity in their careers.

This historic win didn’t happen by chance. It took years of collaboration by an impressive team of beauty industry partners who rallied the industry under a unified, aggressive strategy. Kudos to Gordon Logan (founder of Sport Clips), Frank Zona, chair of the ISBN Government Affairs Committee, and Myra Reddy and Kati Rapoza of the Professional Beauty Association.

And let’s not forget the steady leadership of Rhoda Olsen, Great Clips’ vice chair of the board, whose coalition-building skills connected franchisors, franchisees, service-worker associations and regulators around a common goal.

Together, these provisions open opportunity, improve fairness, and reflect the value of the service economy that franchises and licensed professionals fuel.

If you’d like to know more about being a Great Clips franchisee and how the team at the corporate office would support you as you build a hair salon franchise, give me a call! I’d love to talk with you.

Beth Nilssen

Director of Franchise Development | Great Clips, Inc.
800-947-1143 | [email protected]