U.S. Code » 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

26 U.S.C. § 45B

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

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(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 taxFor purposes of this section—(1) In generalThe 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) Application only to certain lines of businessIn 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.

(Added Pub. L. 103–66, title XIII, § 13443(a), Aug. 10, 1993, 107 Stat. 568; amended Pub. L. 104–188, title I, § 1112(a)(1), (b)(1), Aug. 20, 1996, 110 Stat. 1759; Pub. L. 110–28, title VIII, § 8213(a), May 25, 2007, 121 Stat. 193; Pub. L. 119–21, title VII, § 70201(e), July 4, 2025, 139 Stat. 171.)Editorial NotesReferences in Text

Sections 3(m) and 6(a)(1) of the Fair Labor Standards Act of 1938, referred to in subsec. (b)(1)(B), are classified to sections 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 SubsidiariesEffective 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 sections 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.

Notes of Decisions
Cited in 6 cases, 1998–2020 · leading case: United States v. Fior D'Italia, Inc., 536 U.S. 238 (2002).
Sort: Relevance Newest Treatment
United States v. Fior D'Italia, Inc., 536 U.S. 238 (2002). · cites it 4× “, permits restaurants to offset any FICA it pays on employee tips on a dollar for dollar basis against its own income tax liability, 26 U. S. C. § 45B; and the second of which prohibits the IRS from "threaten[ing] to audit" a restaurant in order to "coerce" it into entering the…”
330 West Hubbard Restaurant Corp., Doing Bus. as Coco Pazzo v. United States, 203 F.3d 990 (7th Cir. 2000). · cites it 3× “The 26 U.S.C. § 45B Tax Credit Coco Pazzo next claims that without individual assessments, the IRS cannot determine the amount of the tax credit to which it is entitled under 26 U.”
Fior D'italia, Inc., Plaintiff-Counter-Defendant-Appellee v. United States of Am., Defendant-Counter Claimant-Appellant, 242 F.3d 844 (9th Cir. 2001). · cites it 2× “See 26 U.S.C. § 45B. In 1996, Congress amended § 45B to clarify that the tax credit is available for employer FICA taxes paid on all tips, regardless of whether the employees reported the tips.”
Fior D'Italia, Inc. v. United States, 21 F. Supp. 2d 1097 (N.D. Cal. 1998). “26 U.S.C. § 45B(b). Essentially, employers may take a tax credit for FICA taxes paid on tips in excess of the tax due on federal minimum wage.”
Trinet Grp., Inc. v. United States, 359 F. Supp. 3d 1144 (M.D. Fla. 2018). · cites it 3× “at ¶ 45) To claim the employer social security tax credit provided in 26 U.S.C. § 45B (the "FICA tip credit"), Gevity attached Forms 3800, General Business Credit and Forms 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips.”
Trinet Grp., Inc. v. United States, 979 F.3d 1311 (11th Cir. 2020). “Under 26 U.S.C. § 45B, an employer can claim an income tax credit for its share of FICA taxes on excess tips received by its employees “in connection with the providing, delivering, or serving of food or beverages for consumption if the tipping of employees delivering or serving…”
— 26 U.S.C. § 45B(b) — 1 case
Fior D'Italia, Inc. v. United States, 21 F. Supp. 2d 1097 (N.D. Cal. 1998). “26 U.S.C. § 45B(b). Essentially, employers may take a tax credit for FICA taxes paid on tips in excess of the tax due on federal minimum wage.”
— 26 U.S.C. § 45B(b)(l)(A) — 1 case
Fior D'italia, Inc., Plaintiff-Counter-Defendant-Appellee v. United States of Am., Defendant-Counter Claimant-Appellant, 242 F.3d 844 (9th Cir. 2001). “See 26 U.S.C. § 45B. In 1996, Congress amended § 45B to clarify that the tax credit is available for employer FICA taxes paid on all tips, regardless of whether the employees reported the tips.”
— 26 U.S.C. § 45B(b)(l)(B) — 1 case
330 West Hubbard Restaurant Corp., Doing Bus. as Coco Pazzo v. United States, 203 F.3d 990 (7th Cir. 2000). “The 26 U.S.C. § 45B Tax Credit Coco Pazzo next claims that without individual assessments, the IRS cannot determine the amount of the tax credit to which it is entitled under 26 U.”
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