Title 26, Internal Revenue CodeRelease 119-110
§45B Credit for Portion of Employer Social Security Taxes Paid with Respect to Employee Cash Tips
Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter A — Determination of Tax Liability › PART IV — CREDITS AGAINST TAX › Subpart D — Business Related Credits › § 45B
Summary
Lets employers claim a tax credit under section 38 for extra Social Security tax they paid on employees’ cash tips during the year. "Excess employer social security tax" — the extra tax under section 3111 on tips treated as paid to the employee under section 3121(q) that is more than the shortfall between the employee’s non-tip pay and the federal minimum wage under section 6(a)(1) (ignore section 3(m); for food/beverage places, use rules as of January 1, 2007). It only covers tips from food or beverage service and certain personal services (barbering/hair care, nail care, esthetics, and body/spa treatments). The employer cannot also take a deduction for any amount used for this credit. An employer can choose not to claim the credit for any tax year.
Full Legal Text
Title 26, §45B
Internal Revenue Code, Source: USLM XML via OLRC
(a)General rule
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)Excess employer social security tax
For purposes of this section
(1) In general
(2)Application only to certain lines of business
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)Denial of double benefit
No deduction shall be allowed under this chapter for any amount taken into account in determining the credit under this section.
(d)Election not to claim credit
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
Sep 22, 2026
Release point: 119-110