Tipped occupations ยท Personal Appearance and Wellness
Barber and Stylist Tips and the 2026 Tips Deduction: Code 603
Barbers, hairdressers, hairstylists and cosmetologists appear on the Treasury list behind the 2026 tips deduction as occupation code 603, in the Personal Appearance and Wellness category of the final regulations (T.D. 10044). The deduction, up to $25,000 of qualified tips per return for tax years 2025 through 2028, reaches the chair by two different routes: an employed stylist sees reported tips in Box 12 of the W-2 with code TP, and a booth renter or shop owner is self-employed, where the IRS caps the deduction at the net income from the business the tips came from. Card tips at the register count the same as cash in the drawer; a mandatory service fee the shop adds does not count at all.
Last reviewed: November 4, 2026.
The facts, in one table
| Treasury Tipped Occupation Code | 603, Barbers, Hairdressers, Hairstylists, and Cosmetologists |
|---|---|
| Category in the final regulations | Personal Appearance and Wellness |
| Related codes in the same category | 601, Skincare Specialists; 602, Massage Therapists; 604, Shampooers; 605, Manicurists and Pedicurists; 607, Makeup Artists |
| The deduction | Up to $25,000 of qualified tips per return, for tax years 2025 through 2028, claimed on Schedule 1-A whether or not you itemize |
| Phaseout | The amount after the $25,000 limit is reduced by $100 for each $1,000 of modified adjusted gross income over $150,000, or $300,000 on a joint return, counting whole $1,000 steps only (section 224(b)(2) of the Internal Revenue Code; 26 CFR 1.224-1(b)(2)) |
| Where the figure appears | Employed: Box 12 of your W-2, code TP, with code 603 in Box 14b, and for 2026 the deduction is generally limited to the amount the employer separately reported. Self-employed: the tips are business income on Schedule C, and the IRS states qualified tips must be reported on a Form 1099 form or on Form 4137 to be eligible for the deduction (Tax Tip 2026-26) |
| Payroll tax | Unchanged. Tips are wages for Social Security and Medicare tax in full; the deduction reduces income tax only |
Read the code the way the site reads the whole list: appearing on the Treasury list is a published fact about an occupation. It is not a decision about any one worker, and the rest of the rules on this page, the reporting rule in particular, decide what a deduction is built from. The full list of 71 codes is on the Treasury Tipped Occupation Codes page.
booth renters run a different route
Two ways to work the chair, two ways the tips are reported
Employed by the shop. The employee route is the standard one: cash tips of $20 or more in a calendar month are reported to the employer by the tenth day of the following month (IRS Topic No. 761), card tips run through the shop's own register records, and the reported total is what the employer prints in Box 12 code TP. Tips you receive under a tip-sharing arrangement, such as a split with a shampoo assistant, are cash tips in the IRS definition for the person who receives them; the assistant's work carries its own code, 604, Shampooers.
Renting a booth or chair, or running your own shop. You are self-employed, and there is no employer and no code TP. Your tips are business receipts, reported with the rest of the business income on Schedule C, whether they arrived in cash, by card through the shop's terminal or your own reader, or through a booking app. Two consequences follow. Your own records have to separate tips from service prices, because no statement will do it for you. And the IRS applies a second limit to the self-employed: the deduction cannot exceed the net income from the business in which the tips were received (Tax Tip 2026-26). The 1099 tax calculator and the quarterly estimated tax calculator are this site's tools for that side of the system.
What counts as a qualified tip for a barber or stylist
A qualified tip is a voluntary payment, in an amount the customer decides, received in an occupation on the Treasury list. Sorted by the IRS definitions, the cases the chair actually meets are these:
- Cash handed over at the chair or left at the desk for you: a cash tip, the plainest case there is.
- A tip added to a card payment at the register: a charged tip, and charged tips are cash tips in the IRS definition (Topic No. 761), whether the card ran through the shop's terminal or your own reader.
- A tip sent through a payment or booking app, in an amount the client chooses: a voluntary payment from the customer, on the same footing as cash.
- Your share of a tip split under a shop tip-sharing arrangement: cash tips in the IRS definition include tips received from other employees under any tip-sharing arrangement, for the assistant who receives a cut as for the stylist who receives the original tip.
- A mandatory charge the shop adds to every ticket, such as a set product fee or service fee: not a tip, even if the shop passes it to the stylists. It is the shop's charge, set by the business and owed by every client, so it is pay or business receipts, never a qualified tip.
charged tips at the register count
The wage under the tips
The deduction sits on top of the wage for employed stylists, and the wage for tipped work is set by the Fair Labor Standards Act and by your state. A booth renter is not paid a wage at all; the table governs the employed route. Nevada, the state this site is operated from, is one of the states with no tip credit: the Department of Labor table sets the minimum cash wage at the full $12.00 state minimum wage, and tips sit entirely on top of it.
| Minimum wage the combined pay must reach | $7.25 an hour |
|---|---|
| Lowest cash wage an employer may pay a tipped employee | $2.13 an hour |
| Maximum tip credit | $5.12 an hour |
| Tipped employee, federal definition | A worker in an occupation that customarily and regularly receives more than $30 a month in tips |
The tip credit is a credit toward the minimum wage, not a discount on it: the employer may count up to $5.12 an hour of a tipped employee's tips toward the $7.25, and if cash wages plus tips do not reach the full minimum wage, the employer owes the difference. States set their own floors on top of the federal one, and the full state table, exactly as the U.S. Department of Labor publishes it, follows. Source: U.S. Department of Labor, Wage and Hour Division, "Minimum Wages for Tipped Employees", last revised July 1, 2026, retrieved November 4, 2026.
States that require the full state minimum wage before tips
| Jurisdiction | Basic combined cash and tip minimum wage | Maximum tip credit | Minimum cash wage | Tipped employee: tips received per month |
|---|---|---|---|---|
| Alaska | $14.00 | |||
| California | $16.90 | |||
| Guam | $9.25 | |||
| Minnesota | $11.41 | |||
| Montana: business with gross annual sales over $110,000 | $10.85 | |||
| Montana: business not covered by the Fair Labor Standards Act, with gross annual sales of $110,000 or less | $4.00 | |||
| Nevada | $12.00 | |||
| Oregon | $15.55 (standard statewide); $16.80 (Portland metro); $14.55 (nonurban counties) | |||
| Washington | $17.13 |
States that require a minimum cash wage above the federal $2.13 an hour
| Jurisdiction | Basic combined cash and tip minimum wage | Maximum tip credit | Minimum cash wage | Tipped employee: tips received per month |
|---|---|---|---|---|
| Arizona | $15.15 | $3.00 | $12.15 | Not specified |
| Arkansas | $11.00 | $8.37 | $2.63 | Not specified |
| Colorado | $15.16 | $3.02 | $12.14 | More than $30 |
| Connecticut: hotel and restaurant workers | $16.94 | $10.56 | $6.38 | Not specified |
| Connecticut: bartenders who customarily receive tips | $16.94 | $8.71 | $8.23 | |
| Delaware | $15.00 | $12.77 | $2.23 | More than $30 |
| District of Columbia | $18.40 | $8.10 | $10.30 | Not specified |
| Florida | $14.00 | $3.02 | $10.98 | More than $30 |
| Hawaii | $16.00 | $1.25 | $14.75 | |
| Idaho | $7.25 | $3.90 | $3.35 | More than $30 |
| Illinois | $15.00 | 40 percent of the applicable minimum wage ($6.00) | $9.00 | Not specified |
| Iowa | $7.25 | 40 percent of the applicable minimum wage ($2.90) | $4.35 | More than $30 |
| Maine | $15.10 | 50 percent of the applicable minimum wage ($7.55) | $7.55 | More than $191 |
| Maryland | $15.00 | $11.37 | $3.63 | More than $30 |
| Massachusetts | $15.00 | $8.25 | $6.75 | More than $20 |
| Michigan | $13.73 | $8.24 | $5.49 | Not specified |
| Missouri | $15.00 | 50 percent of the applicable minimum wage ($7.50) | $7.50 | Not specified |
| New Hampshire | $7.25 | $3.98 | $3.27 | More than $30 |
| New Jersey | $15.92 | $9.87 | $6.05 | More than $30 |
| New Mexico | $12.00 | $9.00 | $3.00 | More than $30 |
| New York | $17.00 (New York City, Long Island and Westchester); $16.00 (remainder of the state) | Varies by region and type of employer | Varies by region and type of employer | Not specified |
| North Dakota | $7.25 | 33 percent of the applicable minimum wage ($2.39) | $4.86 | More than $30 |
| Ohio: employers with annual gross receipts of $405,000 or more | $11.00 | $5.50 | $5.50 | More than $30 |
| Oklahoma | $7.25 | $5.12 | $2.13 | Not specified |
| Pennsylvania | $7.25 | $4.42 | $2.83 | $135 |
| Rhode Island | $16.00 | $12.11 | $3.89 | More than $30 |
| South Dakota | $11.85 | 50 percent of the applicable minimum wage ($5.92) | $5.93 | More than $35 |
| Vermont | $14.42 | 50 percent of the applicable minimum wage ($7.21) | $7.21 | More than $120 |
| Virgin Islands | $10.50 | $6.30 | 40 percent of the applicable minimum wage ($4.20) | Not specified |
| Wisconsin | $7.25 | $4.92 | $2.33 | Not specified |
| West Virginia | $8.75 | 70 percent of the applicable minimum wage ($6.13) | $2.62 | Not specified |
States where the minimum cash wage is the federal $2.13 an hour
| Jurisdiction | Basic combined cash and tip minimum wage | Maximum tip credit | Minimum cash wage | Tipped employee: tips received per month |
|---|---|---|---|---|
| Alabama | $7.25 | $5.12 | $2.13 | More than $30 |
| American Samoa | Special minimum wage rates apply | $2.13 | More than $30 | |
| Georgia | $7.25 | $5.12 | $2.13 | More than $30 |
| Indiana | $7.25 | $5.12 | $2.13 | More than $30 |
| Kansas | $7.25 | $5.12 | $2.13 | Not specified |
| Kentucky | $7.25 | $5.12 | $2.13 | More than $30 |
| Louisiana | $7.25 | $5.12 | $2.13 | More than $30 |
| Mississippi | $7.25 | $5.12 | $2.13 | More than $30 |
| Nebraska | $15.00 | $12.87 | $2.13 | Not specified |
| North Carolina | $7.25 | $5.12 | $2.13 | More than $20 |
| Northern Mariana Islands | $7.25 | $5.12 | $2.13 | More than $30 |
| Puerto Rico | $10.50 | $8.37 | $2.13 | More than $30 |
| South Carolina | $7.25 | $5.12 | $2.13 | More than $30 |
| Tennessee | $7.25 | $5.12 | $2.13 | More than $30 |
| Texas | $7.25 | $5.12 | $2.13 | More than $20 |
| Utah | $7.25 | $5.12 | $2.13 | More than $30 |
| Virginia | $12.77 | $10.64 | $2.13 | More than $30 |
| Wyoming | $7.25 | $5.12 | $2.13 | More than $30 |
- Florida: the figures above are the ones in the July 1, 2026 revision. The Department of Labor's own footnote to this table states that the Florida minimum wage is scheduled to increase by $1.00 every year on September 30 until reaching $15.00 on September 30, 2026.
- Hawaii: the tip credit is permissible only if the combined amount the employee receives from the employer and in tips is at least $7.00 more than the applicable minimum wage.
- Michigan: the Department of Labor's footnote states that the Michigan tipped cash wage is scheduled to increase annually until it reaches 50 percent of the state minimum wage in 2031, and that the Michigan minimum wage is scheduled to increase to $15.00 on January 1, 2027.
- District of Columbia: employers must currently pay a minimum cash wage of at least 56 percent of the standard minimum wage.
- No state minimum wage law: Alabama, Louisiana, Mississippi, South Carolina and Tennessee have no state minimum wage law, and Georgia's law does not apply to tipped employees; employers covered by the Fair Labor Standards Act in those states pay at least the federal minimum wage.
- Not in this table: the Department of Labor notes that some states set subminimum rates for minors or students or a training wage, and some cities and counties set minimum wages higher than the state rate. The Department advises checking with the state labor office for official information.
Estimate the deduction on your own figures
The tips deduction calculator takes your reported tip total and your income, applies the $25,000 limit and the phaseout, and returns an estimated deduction. It asks for nothing but the figures, and the calculation runs in your browser.
If you rent your chair, run the estimate with your own recorded tip total, and keep the self-employed limit beside it: the deduction cannot exceed the net income from your shop business (Tax Tip 2026-26). If you are employed and your January W-2 shows no code TP, the missing codes page sets out the order of fixes; only your employer can correct the form, on Form W-2c.
Other tipped occupations on this site
- Bartender tips deduction, code 101
- Server tips deduction, codes 102 and 103
- Rideshare and delivery driver tips, codes 802 and 804
- Casino dealer tips deduction, code 201
- Golf caddie tips deduction, code 701
- Home services tips deduction, codes 401 to 409
- Hotel staff tips deduction, codes 301 to 304
- Valet parking tips deduction, code 801
- All 71 Treasury Tipped Occupation Codes
Questions and answers
I rent a booth. Are my tips treated differently from an employed stylist's?
It is the same deduction, with two differences in mechanics. Your tips are business income on Schedule C rather than W-2 wages, so there is no code TP figure; the IRS reporting condition is met by the tips being reported on a Form 1099 form or on Form 4137. And the IRS caps a self-employed worker's tips deduction at the net income from the business in which the tips were received (Tax Tip 2026-26).
Clients tip through the front desk and I receive the money in my paycheck. Does it count?
Card tips distributed to you are charged tips, and charged tips are cash tips in the IRS definition (Topic No. 761). For an employed stylist they belong in the total the employer reports in Box 12 code TP, and for a booth renter they are part of the business receipts your own records should show as tips.
My salon adds a service fee to every ticket and gives it to the stylists. Is it a tip for the deduction?
No. A charge set by the business that every customer must pay is a service charge, and service charges are not tips under the IRS rules even when the business passes the money to the staff. The fee is pay, and it is taxable, but it is not a qualified tip and does not belong in code TP or in a tips deduction figure.
Sources
- Treasury Decision 10044, April 13, 2026. The final regulations carrying the 71 Treasury Tipped Occupation Codes. Federal Register, Vol. 91, No. 70, pages 19026 to 19056; the list is Table 1 to paragraph (h) of 26 CFR 1.224-2.
- IRS, Topic No. 761, Tips: withholding and reporting. Cash tips include tips received directly from customers, tips from other employees under any tip-sharing arrangement, and charged tips; the $20 a month reporting rule; service charges are non-tip wages, with the IRS's own examples. Read in full November 4, 2026.
- IRS, Tax Tip 2026-26, March 31, 2026, "Filing tips and updates for gig economy workers". Gig workers may deduct up to $25,000 in tips per return for 2025 through 2028; self-employed workers may deduct qualified tips up to the net income from the trades or businesses in which they were received; qualified tips must be reported on Form W-2, Form 1099-MISC, Form 1099-NEC or Form 1099-K, or reported directly by the taxpayer on Form 4137, to be eligible for the deduction; all gig income must be reported whether or not an information return arrives.
- IRS, Fact Sheet FS-2026-13, August 6, 2026, and the IRS W-2 frequently asked questions. For 2026 the tips deduction on an employee's W-2 is generally limited to the amount the employer separately reported in code TP. Note on source level: a fact sheet is IRS guidance, not binding legal authority.
- IRS, Instructions for Forms W-2 and W-3, tax year 2026. Final version, posted January 30, 2026. Carries Box 12 code TP and Box 14b.
- U.S. Department of Labor, Wage and Hour Division, "Minimum Wages for Tipped Employees". The state tipped minimum wage table on this page is transcribed from this source in full: document last revised July 1, 2026, retrieved November 4, 2026.
- Public Law 119-21, enacted July 4, 2025. Created this deduction in section 224 of the Internal Revenue Code, including its $25,000 limit and the phaseout in section 224(b)(2).
Last reviewed: November 4, 2026.