The 2025 Tax Change That Will Impact Your Studio’s Payroll

(aka: “Congrats, your employees might get tax-free tips… and you might get a surprise payroll tax bill.”)

Let me guess…

You finally got your studio running smoothly.

You’ve got:

• events booked
• shelves stocked
• the birthday parties flowing
• the kiln humming
• and your team mostly showing up on time (a miracle)

And then—because the universe has jokes—2025 shows up with a brand-new tax rule that could quietly change your payroll costs overnight.

Not next year.
Not “sometime eventually.”
Now.

And the kicker?

It’s about tips.

Yes. Tips.

The thing you’ve probably ignored because:

1. your studio isn’t a restaurant
2. tipping is inconsistent
3. you’re just trying to survive Saturday mornings

But this year… tips might become the most important line item on your payroll.

The rule: tips may be tax-free… up to $25,000

Under the One Big Beautiful Bill Act (OBBBA), tips up to $25,000 per year could become completely income tax-free for workers in certain occupations.

And it’s not just cash tips.

We’re talking:
✅ cash
✅ credit card tips
✅ Venmo / CashApp tips
✅ basically anything… as long as it’s voluntary and not required

So if you have staff who get tipped—even occasionally—this could matter.

A lot.

The question studio owners are asking: “Do my employees qualify?”

Here’s where things get spicy:

Studio employees aren’t specifically named on the IRS’s preliminary list.

So if you were hoping for a clean, comforting “yes”…
you will not be receiving that today.

However…

There’s a very real argument that many studio employees could fall under qualifying categories such as:

1) Recreation & instruction

This includes roles like:

• self-enrichment teachers
• recreation workers
• instructors

If your team helps customers with painting techniques, guides walk-ins, runs birthday parties, teaches workshops, or leads events…

You’re not that far off.

2) Personal services

This includes roles like:

• private event workers
• party planners
• photographers

If your staff supports events, celebrations, parties, and private bookings…

Again… solid argument.

Not guaranteed.
But not impossible either.

And here’s the part that matters most:

To qualify, the employee must have been customarily tipped before December 31, 2024.
Meaning you can’t suddenly add tipping in 2025 and pretend it was always part of the culture.

(The IRS does not love last-minute creativity.)

Now for the part that affects your bank account

Even if tips become tax-free for employees…

You still owe payroll taxes on every dollar reported.

That means:

• Social Security
• Medicare
• FUTA (federal unemployment)
  …still apply.

So your employees might celebrate…

…and then your payroll tax bill shows up like:

“HELLO 👋 I’M STILL HERE.”

Why this could quietly increase your payroll costs

This is the sneaky part most studio owners won’t see coming:

Because tips are tax-free for employees, they might start reporting more tips.

Not because they’re trying to scam you…

But because:

• there’s no income tax penalty now
• reporting higher income helps with mortgages, car loans, rentals, and credit approvals
• employees may actually feel more comfortable reporting “real” numbers

So if you’re used to seeing something like:

$20/week reported tips
…you might suddenly see:

$200/week reported tips

Which means higher payroll tax expense for you.

And you’ll feel it.

Especially if you have multiple employees.

The weird upside (yes, there is one)

This could actually help your studio long-term.

When employees know:

• their tips are tax-free
• their reported income is higher
• their financial life improves

They’re less likely to leave for a small hourly bump down the street.

So this rule could lead to:
✅ better retention
✅ more stability
✅ happier staff
✅ fewer “I found something else” texts

(You know the ones.)

Why PYOP Accounting is talking about this now

Because your studio deserves:

• financial management with ease
• a clear path to profitability
• systems baked into the DNA of your business
• and a business that supports you the way you support everyone else

At PYOP Accounting, we work with studio owners—especially women-owned businesses—who want their studio to be a real source of income, a worthy investment, and a business that doesn’t require Olympic-level stress to operate.

Because life is too short for low returns on big energy.

And payroll surprises?
Those are the fastest path to burnout.

Connect with us!

Please follow us on Facebook and Instagram. Please make sure to check out our blog and our website link below. Subscribe to our YouTube channel and hit the bell to be notified when we post. You can email me at donna@pyopaccounting.com.

Donna Bordeaux, CPA with PYOPAccounting.com

Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA, as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.