Nail technicians sit squarely on the Treasury list of customarily tipped occupations, and both employment models qualify: W-2 salon employees deduct reported tips from their W-2, and self-employed techs — booth renters, suite operators — deduct tips documented in their business income, limited to the net profit of the business. Up to $25,000 per return, through 2028.
The industry's constraint is documentation. Card tips through the salon POS or your own Square are itemized and provable; the cash a client leaves on the table qualifies only if it was reported — to your employer as a W-2 tech, or in your gross receipts as a renter. A tech doing $55,000 of services with 18% average tips generates about $10,000 in tips; how much deducts depends entirely on how much of it hit the books. For 2025 amendments, claim what your records support.
Going forward, the arithmetic has changed: every reported tip now carries an income-tax deduction with it, which shrinks the old "cost" of reporting cash. For a tech in the 12% bracket, reporting a cash tip now costs FICA alone — while building Social Security credit and, for renters, provable income for loans and leases. The deduction runs through 2028; the record-keeping habit pays every one of those years.