The One Big Beautiful Bill Act (OBBBA), signed July 2025, made the QBI deduction permanent (20% off net business income), created a new $25,000 tip deduction for eligible workers, raised the 1099-NEC threshold to $2,000 for 2026 payments, and restored the 1099-K threshold to $20,000.
What Is the One Big Beautiful Bill?
President Trump signed the One Big Beautiful Bill Act (OBBBA) on July 4, 2025. It's the most significant tax reform since the 2017 Tax Cuts and Jobs Act. For freelancers, independent contractors, and gig workers, several provisions directly affect how much you pay and how you report income.
Here's a breakdown of every change that matters to 1099 workers.
The 4 Biggest Changes for 1099 Workers
Before vs. After: Quick Comparison
| Tax Rule | Before OBBBA | After OBBBA |
|---|---|---|
| Tax on tip income | Fully taxable | Up to $25K deductible (2025–2028) |
| QBI deduction | Expiring end of 2025 | Permanent |
| 1099-NEC threshold | $600 | $2,000 (starting 2026 payments) |
| 1099-K threshold (2025) | $600 (was being phased in) | $20,000 + 200 transactions |
| Mileage rate (2026) | 70¢/mile (2025) | 72.5¢/mile (2026) |
Just because a client doesn't send you a 1099 doesn't mean you don't owe taxes. The IRS requires you to report all self-employment income, regardless of whether you received a 1099. The thresholds only determine when businesses must file forms with the IRS.
The QBI Deduction: Now Permanent
The Qualified Business Income (QBI) deduction lets eligible self-employed workers deduct up to 20% of their qualified business income. This is one of the most valuable tax breaks available to freelancers and independent contractors.
Before the OBBBA, this deduction was scheduled to expire at the end of 2025. Now it's permanent — meaning you can plan around it for the long term.
A freelance graphic designer earns $60,000 in net business income. With the 20% QBI deduction, $12,000 is excluded from taxable income. At a 22% tax rate, that's $2,640 saved — every single year.
Who qualifies for QBI?
Most self-employed freelancers and independent contractors qualify. There are income limits and restrictions for certain "specified service trades or businesses" (SSTBs) like law and finance at higher income levels. For most gig workers and freelancers earning under $200K, you're likely eligible.
What Hasn't Changed
- Self-employment tax is still 15.3% on net earnings
- Quarterly estimated tax payments are still required if you expect to owe $1,000+
- Mileage, home office, health insurance, and other deductions still apply as before
- Schedule C is still how you report self-employment income
Frequently Asked Questions
Does the OBBBA apply to my 2024 taxes?
No. Most provisions start with tax year 2025 (returns filed in 2026). The 1099-NEC threshold change applies to payments made starting in 2026.
Does the No Tax on Tips apply to all freelancers?
No — only workers in occupations that customarily receive tips qualify. This includes delivery drivers, rideshare drivers, and service workers. Freelancers who invoice clients for projects don't receive "tips" in the qualifying sense.
I didn't get a 1099. Do I still owe taxes?
Yes. The IRS requires you to report all self-employment income over $400, regardless of whether you received a 1099 form. The threshold changes only affect the paperwork businesses must file.
Is there anything negative in the bill for freelancers?
Some provisions being considered to offset the tax cuts could affect higher-income workers. It's worth consulting a tax professional if your income is over $200,000 or if you operate through an S-corp.
Questions About the New Tax Law?
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