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Fitness Studios & Gyms: Payroll Tax Guide (2026)
Payroll tax for a fitness business is the federal stack every employer runs, withholding, 7.65 percent employer FICA, FUTA, deposits and Form 941, plus the fitness business items this page cites: IRS Tip recordkeeping and reporting, Treasury and IRS final regulations, Occupations That Customarily and Regularly Received Tips (91 FR. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Tax rules specific to fitness businesses
Employees must report cash tips to the employer in a written statement by the 10th day of the following month unless total tips from that employer are under $20 for the month. The employer must withhold income tax and the employee share of Social Security and Medicare tax on reported tips and pay the employer share.
Treasury and IRS final regulations published April 13, 2026 list Exercise Trainers and Group Fitness Instructors as Treasury Tipped Occupation Code 608, an occupation that customarily and regularly received tips, for purposes of the qualified tips deduction. The category covers instructing or coaching groups or individuals in exercise activities for the primary purpose of personal fitness.
The qualified tips deduction for tax years 2025 through 2028 is capped at $25,000 per return and phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers). Employers must separately report cash tips on Form W-2 box 12 code TP and include the Treasury Tipped Occupation Code in box 14b.
The stack every fitness business runs
On one of the exercise trainers and group fitness instructors at the May 2025 national median of $47,160, the employer share of Social Security and Medicare is $3,608 a year, FUTA is $42 after the 5.4 percent state credit on the first $7,000, and income tax withholding follows the employee's W-4. Deposits are monthly or semiweekly depending on the prior lookback period, with a next-business-day deposit whenever $100,000 accumulates. Form 941 is due the last day of the month after each quarter; W-2s and any 1099-NEC at the $2,000 threshold are due January 31.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Employees must report cash tips to the employer in a written statement by the 10th day of the following month unless total tips from that employer are under $20 for the month. The employer must withhold income tax and the employee share of Social Security and Medicare tax on reported tips and pay the employer share. [IRS Tip recordkeeping and reporting]
- Treasury and IRS final regulations published April 13, 2026 list Exercise Trainers and Group Fitness Instructors as Treasury Tipped Occupation Code 608, an occupation that customarily and regularly received tips, for purposes of the qualified tips deduction. The category covers instructing or coaching groups or individuals in exercise activities for the primary purpose of personal fitness. [Treasury and IRS final regulations, Occupations That Customarily and Regularly Received Tips (91 FR, April 13, 2026)]
- The qualified tips deduction for tax years 2025 through 2028 is capped at $25,000 per return and phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers). Employers must separately report cash tips on Form W-2 box 12 code TP and include the Treasury Tipped Occupation Code in box 14b. [IRS Tip recordkeeping and reporting]
Read the full guide to how to calculate payroll taxes, and the rest of the fitness business payroll library.
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Frequently Asked Questions
Fitness business payroll tax: IRS Tip recordkeeping and reporting
Employees must report cash tips to the employer in a written statement by the 10th day of the following month unless total tips from that employer are under $20 for the month. The employer must withhold income tax and the employee share of Social Security and Medicare tax on reported tips and pay the employer share.
Fitness business payroll tax: Treasury and IRS final regulations, Occupations That Customarily and Regularly Received Tips (91 FR, April 13, 2026)
Treasury and IRS final regulations published April 13, 2026 list Exercise Trainers and Group Fitness Instructors as Treasury Tipped Occupation Code 608, an occupation that customarily and regularly received tips, for purposes of the qualified tips deduction. The category covers instructing or coaching groups or individuals in exercise activities for the primary purpose of personal fitness.
What is the employer tax cost on one of the exercise trainers and group fitness instructors?
At the $47,160 national median (BLS OEWS, May 2025): $3,608 in employer Social Security and Medicare, $42 in FUTA after the state credit, plus state unemployment at the employer's assigned rate.
What does managed payroll cost for a fitness business?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Trainer 1099 vs W-2 classification, commission-based training pay and class-based instructor pay are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Fitness Studios & Gyms. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
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