For decades, the Section 45B FICA tip credit was a restaurant industry secret. Hair salons, barbershops, and spas paid the same 7.65% employer FICA on tip income with no path to reclaim a dollar of it.
That changed on July 4, 2025. The One Big Beautiful Bill Act extended Section 45B to beauty and personal care services for the first time in the credit's 32-year history, as confirmed by the IRS Form 8846 framework and the underlying statute. A single salon owner with five tipped employees could now claim roughly $6,885 a year that didn't exist before.
The FICA tip credit is one of four workforce credits in 2026 that are either expanding, expiring, or quietly underclaimed. Some opened up under OBBBA. One sunset on December 31, 2025. Two have been on the books for years and rarely make it onto corporate tax planning agendas. Here's where each one stands and what it means for the rest of this year.
The credit equals 7.65% of qualifying tip income above the federal minimum wage threshold. For restaurants, the baseline is frozen at the January 1, 2007 minimum wage of $5.15 per hour. For the newly eligible beauty and personal care category, it ties to the current $7.25 federal minimum.
Two new wrinkles for 2026:
The beauty industry 15% test. Beauty businesses must show that gross tips equal at least 15% of total gross receipts for the calendar year. Restaurants are exempt from this test under the original 1993 rules.
W-2 reporting changes. Starting in 2026, employers must separately report qualified cash tips on W-2s and include a Treasury tipped occupation code for each tipped employee.
For a typical restaurant with 20 tipped employees averaging $20,000 in annual tips, the credit can run around $30,600 a year. For a salon owner with 5 tipped employees and similar tip volume, the credit can sit around $7,000.
The reason it gets missed isn't eligibility. It's payroll configuration. If your POS system doesn't separate tipped from non-tipped hours, or if your job codes bundle bartenders and back-of-house under the same designation, your accountant can't calculate the credit accurately on Form 8846. The same workflow gaps that miss the FICA credit are the ones our team mapped in our piece on smarter tax credit strategy.
The Federal Empowerment Zone (FEZ) credit gave employers up to $3,000 per qualified employee per year, calculated as 20% of the first $15,000 in wages paid to employees who both lived and worked in a designated empowerment zone. The credit covered 40 designated zones across major cities including Baltimore, Boston, Chicago, Detroit, Los Angeles, and Philadelphia, per Internal Revenue Code Section 1396.
It expired December 31, 2025.
The Consolidated Appropriations Act of 2021 extended FEZ through year-end 2025. Without further congressional action, the credit is unavailable for wages paid on or after January 1, 2026, as documented in IRS guidance on Form 8844.
This matters more than a typical sunset for two reasons.
First, FEZ shared the same legislative cycle as the Work Opportunity Tax Credit, which also expired December 31, 2025. Past patterns suggest reauthorization with retroactive coverage is likely, but timing is uncertain.
Second, employers can still file amended returns for open tax years (2022, 2023, 2024). Companies that operated in empowerment zones during those years and didn't claim the credit can recover credit value through refund claims. This is real money sitting in unfiled amendments. Our team broke down the broader playbook in our piece on protecting incentives beyond WOTC.
For 2026 hires in former zones, the practical step is to maintain documentation of employee residence and work location in case retroactive reauthorization arrives.
The Georgia Jobs Tax Credit is one of the strongest state-level workforce incentives in the country and one of the most consistently underclaimed by employers operating outside core metro Atlanta.
|
County tier |
Credit per net new job |
Minimum jobs required |
|
Tier 1 |
$3,500-$4,000 |
2-5 |
|
Tier 2 |
$2,500 |
10 |
|
Tier 3 |
$1,250 |
15 |
|
Tier 4 |
$750 |
25 |
|
Less Developed Census Tracts, Military Zones, Opportunity Zones |
$3,500 |
2-5 |
Credits are claimable for five years per qualifying job, per the Georgia Department of Revenue and Department of Community Affairs guidance. For taxable years beginning on or after January 1, 2025, unused credits carry forward five years.
The numbers add up quickly. A business creating 50 new jobs in a Tier 1 county at $4,000 per job captures $1,000,000 in credits over five years. Tier 1 and Tier 2 credits can offset up to 100% of state corporate income tax liability. In Tier 1 counties and less developed census tracts, the credit can also be applied against payroll withholding when corporate tax liability is exhausted.
What makes it underused is the same pattern that misses every state-level credit. Companies hire across multiple states, run their tax planning at the federal level, and rarely have someone tracking county-level tier shifts year to year. A county's tier classification can change annually. A job that qualified for Tier 1 treatment in 2025 may sit in Tier 2 in 2026.
Eligible industries include manufacturing, warehousing and distribution, processing, telecommunications, broadcasting, tourism, research and development, biomedical manufacturing, and elderly services. Retail is excluded except in the 40 least-developed counties.
The investment tax credit is the broadest workforce-and-capital incentive on this list. Section 48E offers a base 6% credit on qualifying clean electricity investments, climbing to a 30% bonus credit when prevailing wage and apprenticeship requirements are met and the facility falls under 1 megawatt of capacity.
For employers building new facilities, expanding production lines, or investing in on-site energy infrastructure, the ITC can deliver capital-cost reductions large enough to reshape project economics.
OBBBA rewrote the timeline.
The hard deadlines for solar and wind:
Other technologies retain their pre-OBBBA phaseout schedule, beginning in 2034.
For employers evaluating whether to break ground on a solar array, energy storage build-out, or new manufacturing line with renewable power, the timing question is no longer theoretical. The IRS published Notice 2025-42 clarifying that the 5% safe harbor for establishing beginning-of-construction was only available through September 1, 2025. After that date, only the physical work test qualifies for solar and wind under Section 48E.
The underused angle isn't the credit itself. It's that workforce-focused businesses outside the energy industry don't think of the ITC as theirs to claim. Manufacturing facilities, distribution centers, healthcare campuses, and large multi-tenant employers all qualify when they invest in on-site clean electricity property. The credit pairs well with state-level workforce credits like Georgia's. Audit-readiness on the documentation side matters more than ever, which our team covered in our breakdown of 2026 tax credit audit best practices.
None of these credits suffer from low awareness in tax departments. They suffer from execution gaps in the places where HR, payroll, and finance hand off data.
The FICA tip credit needs payroll job codes that separate tipped from non-tipped hours. FEZ needs employee residence verification matched against HUD's zone locator. Georgia Jobs needs net-new-job counts validated against location-level tier designations. The ITC needs construction-start documentation and prevailing wage compliance proof.
The common thread is that capture lives in workflow, not in awareness.
That's the work Ryze was built for. If you want to see what your current workforce data could be generating across federal and state programs, our team can walk you through what's stackable. The credits are sitting there. The question is whether you've built the workflow to collect them.