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Title 26 — Internal Revenue CodeRelease 119-73

§45B Credit for portion of employer social security taxes paid with respect to employee cash tips

Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter A— - Determination of Tax Liability › Part PART IV— - CREDITS AGAINST TAX › Subpart Subpart D— - Business Related Credits › § 45B

Last updated Apr 6, 2026|Official source

Summary

Employers can get a tax credit equal to the extra Social Security tax they paid on employees’ cash tips. The credit applies only to Social Security tax that was paid on tips the law says the employer must treat as if the employer paid to the worker, even if those tips were not reported. The credit only covers tip amounts that are needed to bring the worker’s base pay (not counting tips) up to the minimum wage under the Fair Labor Standards Act (section 6(a)(1)), determined without section 3(m), and for food or beverage businesses using the rate in effect on January 1, 2007. Only tips from customers for certain services count. That includes serving or delivering food and drinks when tipping is customary, and customer-facing personal services such as barbering, hair care, nail care, esthetics, and body and spa treatments. You cannot claim a tax deduction for any amount used to get this credit. An employer can also choose not to use this credit for a given tax year.

Full Legal Text

Title 26, §45B

Internal Revenue Code — Source: USLM XML via OLRC

(a)For purposes of section 38, the employer social security credit determined under this section for the taxable year is an amount equal to the excess employer social security tax paid or incurred by the taxpayer during the taxable year.
(b)For purposes of this section—
(1)The term “excess employer social security tax” means any tax paid by an employer under section 3111 with respect to tips received by an employee during any month, to the extent such tips—
(A)are deemed to have been paid by the employer to the employee pursuant to section 3121(q) (without regard to whether such tips are reported under section 6053), and
(B)exceed the amount by which the wages (excluding tips) paid by the employer to the employee during such month are less than the total amount which would be payable (with respect to such employment) at the minimum wage rate applicable to such individual under section 6(a)(1) of the Fair Labor Standards Act of 1938 (determined without regard to section 3(m) of such Act, and in the case of food or beverage establishments, as in effect on January 1, 2007).
(2)In applying paragraph (1) there shall be taken into account only tips received from customers or clients in connection with the following services:
(A)The providing, delivering, or serving of food or beverages for consumption, if the tipping of employees delivering or serving food or beverages by customers is customary.
(B)The providing of any of the following services to a customer or client if the tipping of employees providing such services is customary:
(i)Barbering and hair care.
(ii)Nail care.
(iii)Esthetics.
(iv)Body and spa treatments.
(c)No deduction shall be allowed under this chapter for any amount taken into account in determining the credit under this section.
(d)This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 3(m) and 6(a)(1) of the Fair Labor Standards Act of 1938, referred to in subsec. (b)(1)(B), are classified to section 203(m) and 206(a)(1), respectively, of Title 29, Labor.

Amendments

2025—Subsec. (b)(1)(B). Pub. L. 119–21, § 70201(e)(2), struck out “as in effect on
January 1, 2007, and” before “determined without regard to” and inserted “, and in the case of food or beverage establishments, as in effect on
January 1, 2007” after “without regard to section 3(m) of such Act”. Subsec. (b)(2). Pub. L. 119–21, § 70201(e)(1), amended par. (2) generally. Prior to amendment, text read as follows: “In applying paragraph (1), there shall be taken into account only tips received from customers in connection with the providing, delivering, or serving of food or beverages for consumption if the tipping of employees delivering or serving food or beverages by customers is customary.” 2007—Subsec. (b)(1)(B). Pub. L. 110–28 inserted “as in effect on
January 1, 2007, and” before “determined without regard to”. 1996—Subsec. (b)(1)(A). Pub. L. 104–188, § 1112(a)(1), inserted “(without regard to whether such tips are reported under section 6053)” after “section 3121(q)”. Subsec. (b)(2). Pub. L. 104–188, § 1112(b)(1), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “Only tips received at food and beverage establishments taken into account.—In applying paragraph (1), there shall be taken into account only tips received from customers in connection with the provision of food or beverages for consumption on the premises of an establishment with respect to which the tipping of employees serving food or beverages by customers is customary.”

Statutory Notes and Related Subsidiaries

Effective Date

of 2025 Amendment Pub. L. 119–21, title VII, § 70201(j), July 4, 2025, 139 Stat. 173, provided that: “The

Amendments

made by this section [enacting section 224 of this title, amending this section and section 63, 199A, 6041, 6041A, 6050W, 6051, and 6213 of this title, and renumbering former section 224 of this title as section 225] shall apply to taxable years beginning after December 31, 2024.”

Effective Date

of 2007 Amendment Pub. L. 110–28, title VIII, § 8213(b),
May 25, 2007, 121 Stat. 193, provided that: “The amendment made by this section [amending this section] shall apply to tips received for services performed after
December 31, 2006.”

Effective Date

of 1996 Amendment Pub. L. 104–188, title I, § 1112(a)(3), Aug. 20, 1996, 110 Stat. 1759, provided that: “The

Amendments

made by this subsection [amending this section and provisions set out as a note under section 38 of this title] shall take effect as if included in the

Amendments

made by, and the provisions of, section 13443 of the Revenue Reconciliation Act of 1993 [Pub. L. 103–66].” Pub. L. 104–188, title I, § 1112(b)(2), Aug. 20, 1996, 110 Stat. 1759, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to tips received for services performed after December 31, 1996.”

Effective Date

Section applicable with respect to taxes paid after Dec. 31, 1993, with respect to services performed before, on, or after such date, see section 13443(d) of Pub. L. 103–66, as amended, set out as an

Effective Date

of 1993 Amendment note under section 38 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 45B

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73