For professionals in the beauty industry, taxes can be more complicated than in a traditional nine-to-five job—especially if you’re self-employed, rent a booth, or sell products.
This guide breaks down hairstylist taxes in plain language, covering employment status, income reporting, deductions, self-employment tax, quarterly payments, and sales tax basics.
Understanding Your Employment Status
How you work determines how you’re taxed.
Salon Employees (W-2)
If you work under a salon owner or manager, follow a set schedule, and use the salon’s systems, you’re typically a W-2 employee. Your employer withholds federal and state taxes from your paycheck and provides Form W-2 at tax time.
Independent Stylists & Self-Employed Professionals (1099)
If you rent a chair or booth, run your own business, or work out of your home, you’re generally considered self-employed. Payments of $600 or more from a single payer may be reported on Form 1099-NEC or 1099-K, but even if you don’t receive a form, you’re still required to report all income.
Because independent stylists are treated as business owners for tax purposes, reporting doesn’t stop with income. If you pay chair or booth rent to a salon owner, you may be required to issue a Form 1099-NEC to that owner when total rent payments reach $600 or more for the year—provided the rent is paid by cash, check, or bank transfer. When rent is paid through a credit card or third-party payment processor, the reporting responsibility may instead fall on the payment processor.
In practice, this means independent stylists should keep clear records of rent payments and request a Form W-9 from the salon owner when necessary to stay compliant.
Business Structures for Self-Employed Stylists
Most self-employed hairstylists operate as:
- Sole proprietors, which are easy to set up but offer no separation between personal and business liability
- LLCs, which provide liability protection and clearer separation between business and personal finances
The right structure depends on your income level, risk tolerance, and long-term goals.
What Counts as Taxable Income?
When reporting income, include:
- Client service fees
- Tips
- Wages from any secondary job
- Retail product sales
- Cash, checks, card payments, and digital payments (Venmo, PayPal, etc.)
If income isn’t documented on a tax form, keeping your own records is essential.
Tax Law Changes: “No Tax on Tips” – What Hairstylists Need to Know for 2025–2028
Beginning in 2025, a new federal tax deduction allows some tipped workers, including hairstylists, to reduce their federal taxable income based on tips they earn. This provision applies to the 2025 through 2028 tax years.
Despite how it’s often described, this change does not make tips completely tax-free. Instead, it creates a limited income tax deduction for qualifying tip income.
How the Tip Deduction Works
- Eligible workers may deduct up to $25,000 per year in qualified tips when calculating federal taxable income.
- The deduction is phased out for higher earners and may be reduced or eliminated depending on total income.
- The deduction applies whether you itemize or take the standard deduction.
Who May Qualify
To claim the deduction, you must:
- Earn tips in an occupation that customarily and regularly received tips before 2025 (hair stylists qualify)
- Properly report all tips as income
- Meet federal filing and income requirements
Both employees and self-employed stylists may qualify, provided they meet the rules.
What Still Applies
Even with the new deduction:
- Tips are still reported as income
- Social Security and Medicare taxes still apply
- Employees pay payroll (FICA) taxes on tips
- Self-employed stylists pay self-employment tax on tips
- State and local taxes may still apply, depending on where you live
Important Limitations
- Only voluntary tips qualify; mandatory service charges or automatic gratuities generally do not.
- The deduction is temporary and currently scheduled to expire after 2028 unless extended by Congress.
Why Recordkeeping Matters
Because eligibility and deduction amounts depend on documented tip income, hairstylists should keep accurate records, including:
- Daily tip logs
- Point-of-sale reports
- Pay statements or earnings summaries
Paying Taxes: Employee vs. Self-Employed
Employees
Taxes are withheld automatically from each paycheck. Employees typically pay:
- Federal income tax
- State income tax (if applicable)
- Payroll taxes for Social Security and Medicare
Self-Employed Stylists
If you’re self-employed, you are responsible for paying all applicable taxes yourself, including:
Self-Employment Tax
Self-employment tax covers Social Security and Medicare. The current rate is 15.3%:
- 12.4% for Social Security (up to the annual income cap)
- 2.9% for Medicare (no income limit)
If your net income exceeds $400, you must pay self-employment tax.
Quarterly Estimated Taxes
Because taxes aren’t withheld from your income, the IRS generally requires quarterly estimated tax payments if you expect to owe $1,000 or more for the year. Payments are typically due in April, June, September, and January.
Common Tax Deductions for Hairstylists
Tax deductions reduce taxable income and can significantly lower your tax bill. Expenses must be ordinary and necessary for your business.
Common deductions include:
Tools, Supplies & Equipment
Scissors, clippers, styling tools, products, capes, chairs, and other work essentials.
Booth or Chair Rental
Rental fees paid to a salon are generally deductible.
Mileage & Travel
Business travel—such as house calls or trips to purchase supplies—may be deductible. Commuting to a fixed work location is not.
Home Office
If part of your home is used exclusively and regularly for business, you may qualify for a home office deduction.
Licensing & Education
State licensing fees and continuing education related to your current profession.
Insurance
Health insurance premiums (for eligible self-employed individuals) and business liability insurance.
Marketing & Advertising
Websites, business cards, social media ads, photography, and promotional materials.
Phone & Internet
The business-use portion of your phone and internet costs.
Retirement Contributions
Eligible contributions to SEP IRAs or Solo 401(k)s.
What You Generally Cannot Deduct
Some expenses are not deductible, including:
- Personal grooming or everyday clothing
- Commuting mileage to a fixed workplace
- Fines, penalties, or parking tickets
- Life insurance premiums where you are the beneficiary
Sales Tax Basics for Hairstylists
If you sell physical products—such as shampoos, conditioners, or styling tools—you may be required to collect and remit sales tax.
When Sales Tax Applies
- Services are often not taxable
- Retail product sales usually are
- Some states tax bundled service-and-product transactions
Sales tax laws vary by state and locality, so rules depend on where you operate and where your customers are located.
Registering & Filing
Before collecting sales tax, you must obtain a sales tax permit or seller’s license from your state (and sometimes your city or county). Once registered:
- Sales tax collected belongs to the state, not you
- You must file returns on time—even if no tax was collected
- Late filings can result in penalties and interest
Good recordkeeping is critical for compliance.
Staying Organized for Tax Season
Best practices include:
- Keeping detailed income and expense records
- Separating business and personal finances
- Using bookkeeping or accounting software
- Saving digital copies of receipts
- Consulting a tax professional familiar with self-employment
Final Thoughts
Taxes don’t have to be overwhelming—but they do require planning. Whether you’re a salon employee, independent stylist, or business owner, understanding your obligations and keeping clean records can make tax season far less stressful.
Because tax laws and personal situations vary, working with a qualified tax professional can help ensure compliance and prevent costly mistakes. Let A-Tex Tax handle your tax and accounting needs so that you can focus on your passion.