Tips run 15–25% on services, so a stylist doing $80,000 of annual services collects $12,000–$20,000 in tips — squarely inside the new deduction's $25,000 cap. What makes the beauty industry unusual is that the deduction doesn't care which side of the W-2/1099 line you're on: salon employees deduct reported W-2 tips, and self-employed booth renters deduct tips reported in their business income, limited to that business's net profit.
For W-2 stylists, card tips through the salon's POS are already on the W-2 and qualify automatically; cash tips qualify when reported to the salon. For booth renters and suite owners, the tips sitting inside your Square or Vagaro deposits — the ones you've been paying self-employment tax on — are the qualified amount, provided your books can separate tips from service revenue. That separation is the whole game for self-employed claims, and it's the first thing the review looks at.
The net-income limit matters for newer booth renters: heavy first-year expenses that shrink your Schedule C profit also cap how much tip deduction you can use. And as everywhere, the deduction cuts income tax only — self-employment tax on those tips continues. It runs through 2028, so getting the bookkeeping right once pays four times.