Yes. Restaurants get a dollar-for-dollar tax credit for the employer share of FICA tax paid on employee tips. It is worth 7.65% of the tips your team reports, it applies to the current year and up to 3 prior tax years, and it repeats every year your staff report tips. There are no upfront costs and no out-of-pocket money. You pay only if a credit is secured.
When an employee reports tips, you pay FICA tax on those tips just as you do on wages: 7.65% from the business, on top of the employee's share. The FICA tip credit, Internal Revenue Code section 45B, hands the business share back as a credit against income tax. Because it is a credit and not a deduction, every dollar of credit is a dollar less of tax.
The credit has been in the tax code since 1993, yet most owners have never heard of it. Most accountants never mention it because they are not aware of it, so it usually takes a specialist review of tipped payroll to surface and claim it.
The recent headlines about no tax on tips are about employees and their own income tax. This credit is different: it belongs to the business, it covers the FICA tax the business pays, and it can reach back up to 3 prior tax years, which the newer rules do not do for owners. The two do not conflict; a restaurant can benefit from both.
See what it could be worth for your team with the free tip credit estimator, or read how much the credit is worth in worked examples.
Which businesses get it? Restaurants, bars, nightclubs, cafes, and catering venues with tipped W-2 employees who report their tips. Since the 2025 tax year, salons and spas are covered too, under their own rules at ficatip.org.
How much is it? 7.65% of reported tips per year. A restaurant with $500,000 in reported tips qualifies for about $38,250 for that year.
What does it cost? The eligibility check is free. There are no upfront costs and no out-of-pocket money. You pay only if a credit is secured. If no credit is secured, there is nothing to pay.
Free check. Success fee only. No upfront cost.