Expands an existing federal tax credit to let certain tips from defined beauty services qualify, sets rules businesses must meet before that credit applies, and adds new IRS protections and reporting for tip and rental-payment activity in the beauty-service industry. It creates a “tip program safe harbor” that prevents employer tip audits if the employer follows specified steps, and it requires landlords or space-rental businesses that receive $600+ per year from multiple beauty-service providers to report those payments to the IRS and to the providers.

Most of the new rules take effect for tax years and payments after December 31, 2025. The changes aim to bring tips from beauty services into the tax-credit rules, reduce employer audit risk when employers implement compliant tip-reporting programs, and increase reporting of rental income in the beauty-service sector — with new recordkeeping and reporting responsibilities for businesses and potential compliance costs for small providers and landlords.