Most restaurant owners don’t realize they can claim a dollar-for-dollar tax credit for the employer FICA taxes they pay on employee tips. Section 45B can put tens of thousands back in your pocket every year.
Enter your restaurant’s aggregate tipped employee data below.
When your employees report tips, you pay 7.65% in employer FICA taxes (Social Security + Medicare) on those tips — just like you do on their wages.
The IRS gives you a dollar-for-dollar tax credit for the employer FICA you paid on tips above the $5.15/hr threshold. This directly reduces your tax bill — not just your taxable income.
The credit reduces your wage deduction by the same amount, so the net savings depend on your marginal tax rate. But for most restaurants, it’s still thousands of dollars per year.
Important: This calculator provides a simplified estimate for educational purposes only. The actual §45B credit is calculated on a per-employee, per-pay-period basis using each employee’s specific hours, tips, and wage rate — not averages. The §45B FICA Tip Credit uses the $5.15/hr minimum wage rate in effect on January 1, 2007, as the baseline for restaurants (IRC §45B(b)(1)(B)). Tips used to bring an employee’s wages up to $5.15 are excluded. The credit rate is 7.65% (employer SS 6.2% + Medicare 1.45%) and drops to 1.45% once an employee’s total compensation exceeds the Social Security wage base ($184,500 for 2026). The credit reduces the employer’s deduction for wages and tips by the credit amount. Mandatory service charges are not tips. Consult with a tax professional for a precise calculation tailored to your business.
We help restaurant owners claim every credit they’re entitled to — including filing amended returns for prior years you may have missed.
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