Pay guide
Are Dog Groomer Tips Taxed? Rules and the New Deduction
Yes, tips are taxable income. But groomers are on the IRS list for the new federal tip deduction, and that changes what many of them will owe.
Tips are a large share of take-home pay for many groomers, and they are also the part of pay that is easiest to get wrong at tax time. Here is how the federal rules work for groomers who are employees, what changed starting with the 2025 tax year, and what to keep track of. This is general information, not tax advice. State rules differ, and a tax professional can confirm how it applies to you.
Tips are taxable income
The IRS treats tips as income, whether they arrive as cash, on a card, or through an app. Card tips usually show up on your paycheck automatically. Cash tips are your responsibility to report.
If you are an employee and receive $20 or more in tips in a month, you are required to report them to your employer by the 10th of the following month. IRS Form 4070 exists for this, and many salons use their own tip log instead. Your employer then withholds income tax, Social Security and Medicare on those tips, usually out of your regular wages.
Tips you never reported to your employer still belong on your tax return as income.
The federal tip deduction: groomers qualify
Starting with the 2025 tax year and running through 2028, eligible workers can deduct up to $25,000 of qualified tips from their federal taxable income. You do not need to itemize to take it. It is claimed on Schedule 1-A of Form 1040.
The deduction only applies to occupations the Treasury has listed as customarily receiving tips. Pet groomers are on that list. They fall under Treasury Tipped Occupation Code 506, "Pet and show animal caretakers," which the IRS describes as workers who "feed, groom, bathe, exercise, and care for pets or show animals," with pet groomer named as an example.
A few limits are worth knowing:
- Income phase-out. The deduction shrinks for incomes above $150,000 for single filers and $300,000 for joint filers, by $100 for every $1,000 over.
- Voluntary tips only. A tip has to be paid voluntarily by the customer. A mandatory service charge added to the bill is not a qualified tip.
- Payroll taxes still apply. The deduction reduces federal income tax only. Social Security and Medicare are still owed on every tip.
- Records matter. The deduction is based on tips that are reported, so unreported cash tips make it harder to claim what you are owed.
If you are self-employed, for example renting a booth, the rules for claiming the deduction are different. Check with a tax professional rather than assuming it works the same way.
What it is worth: a rough example
Say you average $40 a day in tips, five days a week, for 50 weeks. That is $10,000 of tips for the year. If your income falls in the 12 percent federal bracket, deducting those tips lowers your federal income tax by roughly $1,200. You would still owe Social Security and Medicare on them, about $765 at 7.65 percent. Your actual result depends on your total income, filing status and state.
Keep a tip record you can trust
Write down tips the day you receive them, split between cash and card, rather than reconstructing a month from memory. A daily record makes the monthly report to your employer accurate, makes the deduction easy to support, and settles any disagreement about what you were actually paid. Every calculator on this site logs tips per groom or per day and keeps them separate from your commission or hourly pay. With a Pro account you can export every week to a spreadsheet for tax time.
Sources
- IRS: Occupations that customarily and regularly received tips on or before Dec. 31, 2024
- IRS Topic 761: Tips, withholding and reporting