Episode #396 – Big Beautiful Bill and How Stylists and Salons Are Impacted

Do you feel like you were meant to have a kick-ass career as a hair stylist?

Like you got into this industry to make big things happen?

Maybe you’re struggling to build a solid base and want some stability.

Maybe you know social media is important, but it feels like a waste of time because you aren’t seeing any results.

Maybe you’ve already had some amazing success but are craving more.

Maybe you’re ready to truly enjoy the freedom and flexibility this industry has to offer.

Cutting and coloring skills will only get you so far, but to build a lifelong career as a wealthy stylist, it takes business skills and a serious marketing strategy.

When you’re ready to quit just working in your business and start working on it, join us here where we share real success stories from real stylists.

I’m Britt Seva, social media and marketing strategist just for hair stylists, and this is the Thriving Stylist Podcast.

What is up and welcome back to the Thriving Stylist Podcast.

I’m your host Britt Seva, and this week we’re talking about the big, beautiful bill and how stylists and salons are impacted.

Now caveat right at the top, I’m not a CPA, I’m not a financial advisor, I’m not a tax expert, I’m a decent researcher.

I’ve been really studying the evolution of the bill and listening to a lot of experts that I do trust speak to how this will impact small business.

And I want to keep this focused on particularly how Stylists and Salons will be impacted.

The word big is in this bill because there is so much going on in there.

And I’m not going to dissect each and every part of it, A, because I don’t feel well versed in it enough to do so.

And B, because this is a business focused podcast here to help Stylists and Salon owners.

So I am going to focus on the parts and pieces that I think will most impact us working in the industry.

The other thing I want to do is talk about another tax update while we’re talking money and all that kind of good stuff and how it could impact Salon owners.

And I also want to do a teeny tiny training on how tax brackets work.

Most of the changes that we are seeing come through right now, which I’m recording this summer of 2025, are more based on tax deductions and a reduction of taxable income.

And I realized, in the last couple of years, I realized that having truly conversations with some of my friends, I’m a small business owner, the majority of my personal friends are not, and they’ll see me go on business trips and they’ll say, oh my gosh, it’s like money in your pocket, because I’m able to deduct the cost of, you know, the flight I booked against my taxable income, which yes, I can take that deduction against my taxable income, but it’s arguable, if it’s better to have that money in my pocket and just pay the tax on it, then spend it on an airline ticket, right?

And so I just want to zoom out for a second and talk about tax brackets and how they work and tax rates and deductions and what they mean and their overall impact, so that you can get a better sense of how these things might impact you, which I think for a lot of us, when we’re looking at changes like this, yes, we want to know the nuts and bolts, but what does it mean for me?

And there’s a lot of big numbers being thrown around that don’t necessarily equate to the impact that you would feel as an individual.

And so I want to eliminate as many surprises as I can at the end of the year in the best way that I know how.

So zooming out for a second, on July 4th, 2025, President Trump signed the One Big Beautiful Bill Act, which is called the OBBBA in short, into law.

A quote I pulled from the whitehouse.com, so know that this is coming directly from, you know, President Trump and the messaging from his team.

There was a lot of talk about this legislation putting $10,000 a year back in the pockets of typical hardworking families.

If you go to the whitehouse.com and you research this, you’ll see that $10,000 figure mentioned a lot.

And the reason I’m bringing it up is from what I’m reading and what I’m researching, if you were to benefit the most from this big, beautiful bill, your family as a whole could see $10,000 in tax savings is my understanding.

So that’s kind of like the maximum threshold for the person who is getting the most from this.

The other thing was, as I did research, I think the person or the family who is getting that $10,000 savings in full is pretty unique.

I don’t believe that most people are gonna get the whole thing.

I think there’s parts and pieces that impact individuals differently.

And I wanna focus there.

So first things first, like I mentioned in the beginning, this is really about tax credits and tax deductions for the most part.

So I wanna talk about how tax brackets work because I do believe there’s some confusion there.

So in the United States, our federal tax system is called progressive, meaning your income is taxed at different rates or amounts based on different income levels.

So we know that in the sense that the more money you make, the higher your tax rate is.

But what I don’t think people realize is the way that it is stacked.

So I’m gonna rattle off for you currently.

I’m recording this July of 2025.

So let’s start by taking a look at tax rates for single filers, okay?

So 10% for up to $11,925 could be taxable income.

12% from 11,926 to 48,475.

22% from 48,476 to 103,350.

24% from 103,351 to 197,300.

And what happens is there is a stackable rate that goes all the way down from 10%, 12%, 22%, 24%, 32%, 35%, to 37%.

37% is the highest possible taxable income rate right now.

And that’s for single filers earning over $626,350 a year.

So those are our high annual income owners.

Like when we talk about the top 1% paying the most in taxes, is it’s the money earned over $626,000 in a year by a single filer.

When you look at married filing jointly, the numbers increase.

So 10% of taxable earnings up to $23,850 versus for a solo filer, it’s $11,925.

And it scales up from there, 12% from $23,851 to $96,950.

You can Google this and look it up to see what the tax brackets mean.

The reason I’m going over this is because it’s going to make sense in the exercise that I do next.

So income can be taxed anywhere from 10% to 37%.

There’s different what we call brackets or we can call it ranges if you want to simplify the verbiage based on if you’re filing as a single person or married filing jointly.

Okay.

So I want to give you a real life example of how that works.

So imagine that you are single filing independently.

You’re not married.

You’re filing on your own.

And let’s say you have a taxable income of $50,000.

Now, maybe you earned $100,000 in services behind the chair, but then you paid for your color and you paid for your rent, and there was $50,000 left over.

And that was what was considered your taxable income.

So going back to our chart, even though 50,000 technically lands in that 22% bracket, it doesn’t mean all of the 50,000 is charged at 22%.

It follows that scale.

So the first 11,600 of that 50,000 would be taxed at 10%.

Then the next portion of that income from 11,601 to 47,150 is taxed at 12%.

And that little tiny bit that goes over that 47,000 to get us to 50, so the remaining $2,850 falls into the 22% bracket.

So only that last remaining chunk that crosses over 47,000 is taxed at the 22%.

So when you were to look at a really high income earner, somebody who’s let’s say making a million dollars a year in profit or take home pay or taxable income, only the amount over 626,350 is actually taxed at 37%.

On the sliding scale going up, they’re paying the same taxable rate as anybody else.

So essentially, what’s happening with these tax credits is you’re reducing the very top, top, top portion of that taxable income.

So you’re reducing the amount of taxes you pay at that high end when you’re looking at these credits.

So with that understanding and talking about tax credits again, and knowing that these changes are essentially a deduction in the taxable income, so the income that the federal level IRS is looking at when they’re saying, how much tax does this person owe, that bigger chunk, that total taxable income is where things are coming into play.

So first things first, a lot of what is in the Big Beautiful Bill is an extension, either permanently or for the next few years of shifts and changes that were put into place back in 2017.

So the Tax Cuts and Jobs Act of 2017, which is called the TCJA, you’ll see that referenced everywhere, was a huge deal, huge, huge deal when it happened.

So it reduced the top marginal income tax rate from 39.6 percent to 37 percent.

So remember, I was talking a minute ago that the highest tax rate right now is 37 percent.

That’s down from almost 40 percent a few years back, actually almost a decade back now.

So what we’re seeing is a extension of that deduction.

So that reduction was set to expire in 2026.

That’s been made permanent.

So it’s not a change.

It’s a permanency to something that was set to expire.

We have quite a few of those.

For example, the increased standard deduction.

So the TCJA increased the standard deduction, almost doubled it.

So previously, the standard deduction was $6,350.

The TCJA increased it to $12,000.

So that doubling is essentially staying in place.

That is also made permanent.

So what was once set to expire is now permanent.

Now, let’s talk about standard deductions for a second.

So those amounts that I was rattling off are set by the IRS.

And again, it’s a reduction of taxable income.

Now, hopefully, most of you are filing taxes with the help of a CPA.

If you’re not and you’re using some kind of digital system or something else, usually there’s qualifying questions to help you decide if you should take the standard deduction or itemized deductions.

Itemized deductions and business expenses are two totally different things.

So business expenses are the things directly related to running your business.

So cost of color, cost of back bar, booth rent if you’re paying it, something like that, your shares that you bought.

You’re going to deduct those things on your schedule C, which is a tax form that we fill out, regardless of whether you take the standard or itemized deduction.

So I don’t want you to think of when I say itemized deductions, don’t think about business expenses.

That’s a totally different thing we’re talking about.

When we’re looking at standard deduction versus itemized deduction, you and or your CPA make a choice as to which is best for you financially.

Generally speaking, the itemized deductions are what is chosen.

If somebody has high medical expenses or they have significant mortgage interest payments, for those of you who deduct your mortgage interest against your taxes, you’re itemizing, you’re not taking the standard deduction.

So that standard deduction doesn’t impact you because you’re deducting something else.

If you pay big state and local taxes, we’re going to talk about the salt deduction in a moment.

There’s certain circumstances where you would not take the standard deduction.

So some of you listening to this, standardized makes sense for you.

It’s likely what you or your CPA are taking every year.

That stays higher, which is great for you.

For those of you who are itemizing, you do deduct your mortgage interest or you do deduct state and local taxes.

That standardized deduction doesn’t impact you one way or another.

But for those of you who do take the standard, that’s staying in place.

So let’s also talk about the QBI deduction.

So I’ve seen some Instagram posts floating around where it says, 20% deduction of business expenses.

It’s not quite as simple as that.

So QBI is the profit left over after any W-2 wages.

So W-2 wages paid out to your team.

Obviously, that’s going to be a business expense.

But also if you are a salon owner who files as an S corp and you’re on your own payroll, this is going to be what’s left over after you’ve been paid W-2 style and all of that kind of stuff.

So if this was a stylist or a salon owner who made $50,000 and spent $30,000 on rent and supplies, their QBI would be $20,000.

So 20 percent of that $20,000 can be taken as a deduction.

So $4,000.

Now, this is totally separate from itemized deduction versus standard deduction.

So it’s an on top of kind of situation.

So this was also part of the TCJA and it’s just kind of like a bonus deduction for specifically those who are self-employed, small business owners, those with pass-through entities.

Like most of us honestly are probably set up sole props, partnerships, LLCs, filing as an S corp.

You get to take advantage of that QBI deduction as well.

So this big beautiful bill made that permanent.

So again, not a change, but a permanency to something that was temporary at the time.

Okay, so let’s talk about salt deduction for just a second.

And I promise I’m going to get into overtime and taxes on tips because I know everybody’s excited about that too.

So talking about the salt deduction for just a second.

So this is state and local tax deductions.

This does not make sense for everybody.

So some of you live in states where there is no state income tax.

So this has nothing to do with you at all.

Usually the salt deduction is really beneficial to those who live in high tax states.

So we’re talking California, New York, New Jersey.

These are high income tax states at the state income tax level.

So there is an increased cap from 10,000 to 40,000 for 2025.

And that’s going to increase by 1% annually for 2026, 2027, 2028, and 2029.

And then we’ll revert back to 10,000 again in 2030.

So for those who are in high income tax states and itemize, that one can be pretty major too.

Okay, so 20 minutes in.

Let’s talk about changes to taxes on overtime.

I wanted to get through all of the things that essentially were just made permanency or were extended.

And I think we’ve gotten through all of those things.

So let’s get into the new stuff.

So let’s talk for a second about changes to taxes on overtime.

This is something I think a lot of us got really excited about.

And I want to just zoom out and talk about overtime for a second.

Overtime is not something you can opt in or out of as a salon owner.

You have to pay it in accordance with the Fair Labor and Standards Acts.

So employers must pay overtime to anybody who works more than 40 hours in a work week.

And depending on state laws, sometimes it’s over a daily rate, sometimes there is a day of the week where things turn over.

So you need to look at your state laws as well.

But at the federal level, anybody who works more than 40 hours in a work week must make overtime.

Overtime compensation is equal to 1.5 times the state or regular pay.

So if you are somebody who makes $10 an hour, your overtime rate would be 15 bucks an hour, just for simple math.

So eligible workers who receive overtime pay can deduct up to $12,500 per year of their overtime pay.

So just that overtime portion.

And joint filers can deduct up to 25,000 per year.

So again, that’s a deduction of the taxable income.

So if you made $50,000 a year in income, and $12,500 of that was from overtime specifically, then you could take the full deduction, $12,500 from the $50,000, and you would be taxable on the remaining.

Joint filers can deduct up to $25,000 per year.

Now this deduction does not apply to workers who are considered highly compensated and phases out when the threshold income of $150,000 for an individual or $300,000 for joint hits.

Now that’s somebody who’s making these 72 bucks an hour.

So for most of us in this industry, that’s not even going to be a factor.

And you would get to take advantage of that overtime deduction, which is great.

So the employer doesn’t need to do anything for this.

This is something that the employee will do when they’re filing.

And this is in effect from 2025 through 2028 at this time.

So this is temporary.

Now let’s talk about changes to taxes on tips.

So very similar to the overtime compensation deduction, there’s that upper limit threshold.

So anybody who makes over $150,000 as an individual or $300,000 as a couple, this is reduced for you.

So it doesn’t mean you don’t qualify at all, but there is a reduction of $100 per thousand in excess of the threshold.

Again, I don’t think for most of us were even worried about that, so I’m kind of breezing through it.

So qualified tips, I think this is important to understand because some of us in the past couple of years have done things where we don’t accept gratuity, but we kind of baked it in to the cost of our services.

This is not for you.

So qualified tips are the amount that is determined by the payor.

So you can’t say, like if you go to a restaurant and it’s 20% forced gratuity, that does not count here.

It’s an amount that’s determined by the person paying the gratuity, so that was interesting.

It has to be paid by the payer voluntarily, so it cannot be a consequence of not tipping.

They have to choose to do it.

Not subject to negotiation, not part of any mandatory service charged imposed by the vendor, so really doubling down on that, like the payer has to be opting in to giving this gratuity.

And it may include tips garnered from tip pooling.

So if some of you do tip pool for your assistance or something like that, that totally qualifies.

This deduction is capped at $25,000, so a much higher cap.

This can be taken by self-employed individuals.

This is something that was debatable, and there was a lot of back and forth on this when the Big Beautiful Bill was kind of in its inception phases.

Those who are self-employed can take it so long as they do not follow under SSTB in section 199A, which in our industry, we do not fall under that.

So that specifically is those in law, investing, investment, financial services, performing arts, athletics, accounting, and health.

So for us, it’s not an issue.

So we are, those who are self-employed individuals can take advantage of this.

And this is also available for those both itemizing and non-itemizing.

So when we were going back before, and I was saying some people take the standard and some people itemize, this has nothing to do with that.

Anybody can qualify for this.

If you fall into this tips category, if you’re somebody who earns gratuity and you’re not over that high-income threshold, this is something that’s going to reduce your taxable income, which is great.

And also, it does include cash and or credit card tips.

There is an additional filing that you take advantage of when you’re filing for your taxes if you did receive cash tips because it’s called off paper, right?

Or under the table or things like that.

So you have to claim that cash, but that cash or credit card gratuities do count towards this deduction.

Now, a bonus that I think we should talk about, and PBA has been pushing for this for a long time, a new federal law passed in July of 2025, extending the 45B FICA tip tax credit to include beauty service establishments, which is us.

So this allows qualified employers in the beauty industry to claim a dollar for dollar tax credit on the employer share of FICA taxes paid on employee tips specifically.

So it’s kind of like being able to take advantage of a tip tax credit on the employer side too.

It has nothing to do with the big, beautiful bill tax credit, but they just have to be coinciding timeline wise.

So FICA tax is currently that 7.65 percent.

It’s part of the employer tax that we pay on payroll that makes us feel a type away.

So there is a reduction in the employer’s responsibility just on tips at that FICA tax level.

So this could potentially be huge depending on how many tips were being run through your payroll.

If obviously you’re paying the FICA tax on that, this could be thousands of dollars to the salon owner.

And that’s a massive win-ball victory.

I know those FICA taxes feel really heavy.

And if you’re a stylist, you don’t realize like that’s tens of thousands of dollars for a lot of salon owners annually.

So just having the relief even on the tip side is pretty significant and massive.

So for salon owners or business owners to be able to take advantage of that FICA tip credit, this is interesting.

You have to meet eligibility requirements, which are paying at least the federal minimum wage to all employees and having employee tips.

If you do not pay at least minimum wage to all your employees, which I know for some of you, you’re like, well, everybody does that.

No, there’s a lot of salons that don’t do that.

So if you’re not at least doing that, you don’t get to take advantage.

You do have to maintain accurate payroll records to correctly track and report tips received by employees.

You’re going to be completing IRS form 8846, which is the credit for employer social security and Medicare taxes paid on certain employee tips.

Attach it to your tax return and your CPA can help you to do that.

Now a sidebar, employers cannot claim the credit for taxes on any tips used to meet the minimum wage standard.

So minimum wage has to be paid on its own in order for this to be taken into effect.

Okay, so that’s in a nutshell, hopefully enough to help clear up kind of how this will impact you.

For these shifts and changes, I cannot emphasize enough.

It is reducing your taxable income level.

So talking to a CPA, there’s some really great calculators out there that will help you to determine what your tax implication will likely be for this year.

NerdWallet, if you go to nerdwallet.com, it’s one of my favorites.

It’s really easy to use.

If you look up NerdWallet Tax Bracket Calculator, there’s some really great tools there that will kind of help you to understand.

It helps you to put in your deductions and take a look at what things could look like to understand what your tax implication could be for the year.

If you can expect a refund if you’re an employee, get a better sense of what you’ll be owing if you are a booth renter or a business owner.

And as I’ve said 100,000 times before, if you’re not already working with a bookkeeper and a CPA, I just cannot highly suggest it enough.

I know it’s one of those things that feels like an expense.

I’ve only ever called it an investment.

My bookkeeper and CPA save me thousands of dollars a year.

They more than pay for themselves.

I strongly suggest finding somebody that you trust to help you with all of this.

Taxes are hard and audits are harder.

So make sure that you have a good grip on all of these things.

And I hope that you’re somebody who is in a place to come up, at least partially in a financial way, on the relief side of all of this.

So much love, happy business building, and I’ll see you on the next one.