If you earn 1099 income, 2026 brings the most significant tax landscape shift in nearly a decade. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, didn't just extend the 2017 Tax Cuts and Jobs Act (TCJA) provisions that were set to expire — it permanently locked in lower rates, restored powerful business deductions, and introduced brand-new personal deductions that directly benefit freelancers and independent contractors.
This guide walks through every change that matters for your self-employment income, with specific numbers for the 2025 and 2026 tax years. Whether you file as a sole proprietor, single-member LLC, or S-Corp, these updates affect your quarterly estimates, your annual return, and your long-term tax strategy. If you are still choosing a structure, start with our LLC for freelancers guide.
The Big Picture: TCJA Made Permanent
For years, freelancers and tax professionals operated under a cloud of uncertainty. The TCJA's individual tax provisions — including the lower seven-bracket rate structure and the inflated standard deduction — were scheduled to sunset at the end of 2025. Without congressional action, the top marginal rate would have reverted to 39.6%, and the standard deduction would have shrunk significantly.
The OBBBA eliminated that cliff. Here's what became permanent:
Income tax brackets locked in
The seven-bracket federal income tax system — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — is now permanent law. The 37% top rate, which was set to disappear, is here to stay. For self-employed individuals, this means your pass-through income continues to be taxed at these individual rates, and you can plan multi-year tax strategies without worrying about a rate hike.
Standard deduction increased for 2025
The OBBBA raised the standard deduction for the 2025 tax year (the return you file in 2026):
| Filing Status | 2025 Standard Deduction | Change from 2024 |
|---|---|---|
| Single / Married Filing Separately | $15,750 | +$1,150 |
| Married Filing Jointly / Qualifying Widow(er) | $31,500 | +$2,300 |
| Head of Household | $23,625 | +$1,725 |
For most freelancers who take the standard deduction (about 90% of taxpayers do), this means more income shielded from federal tax before any business deductions even come into play.
QBI deduction: 20% permanent
Perhaps the single most impactful change for self-employed individuals: the Qualified Business Income (QBI) deduction under Section 199A is now permanent at 20%. This allows sole proprietors, LLCs, partnerships, and S-Corps to deduct 20% of their qualified business income from taxable income — before calculating income tax.
For a freelancer with $80,000 in net business income, the QBI deduction removes $16,000 from taxable income. That's a direct dollar-for-dollar reduction, not a credit. Combined with the standard deduction and the 50% SE tax deduction, a single freelancer earning $80,000 could see their taxable income drop below $50,000 before any retirement contributions.
Self-Employment Tax: Social Security Wage Base Rises to $184,500
The self-employment tax rate remains 15.3% — 12.4% for Social Security and 2.9% for Medicare. But the Social Security wage base limit, which caps the amount of income subject to the 12.4% Social Security portion, increases for 2026:
| Year | SS Wage Base Limit | Max SE Tax (SS Portion) |
|---|---|---|
| 2025 | $176,100 | $21,836.40 |
| 2026 | $184,500 | $22,878.00 |
The Medicare portion (2.9%) has no cap — it applies to all net SE income regardless of amount. For high-earning freelancers, the Additional Medicare Tax of 0.9% also applies once earned income exceeds $200,000 (single) or $250,000 (married filing jointly), bringing the effective Medicare rate to 3.8% above those thresholds.
What this means for your quarterly estimates
If your net self-employment income exceeds $176,100, you'll pay Social Security tax on an additional $8,400 in 2026 compared to 2025. That's an extra $1,041.60 in SE tax for the Social Security portion alone. Factor this into your quarterly estimated payments to avoid underpayment penalties.
New Business Deductions: Bonus Depreciation and Section 179
The OBBBA delivered two major wins for freelancers who invest in equipment, software, or business property:
100% bonus depreciation restored
Bonus depreciation had been phasing down — 60% in 2024, 40% in 2025 — under the original TCJA schedule. The OBBBA restored 100% bonus depreciation for qualified property placed in service after January 19, 2025, and before January 1, 2030. This means you can deduct the full purchase price of eligible business equipment — computers, cameras, specialized tools, vehicles used for business — in the year you buy them, rather than depreciating over several years.
For a freelance photographer who buys a $5,000 camera and lens kit in 2025, the entire $5,000 is deductible in the 2025 tax year. Previously, only 40% ($2,000) would have been deductible immediately.
Section 179 expensing increased
The Section 179 deduction limit, which allows you to expense qualifying business property immediately (similar to bonus depreciation but with different rules), was also increased. The OBBBA raised the limit from $1,220,000 in 2024 to $2,500,000 for 2025, with a phase-out threshold of $4,000,000. For 2026, the limit is $2,560,000, phasing out dollar-for-dollar once total qualifying purchases exceed $4,090,000 and fully eliminated at $6,650,000.
The key difference: Section 179 is elective and per-item, while bonus depreciation is automatic (you have to elect out). Many freelancers use Section 179 for specific high-value purchases and let bonus depreciation handle the rest.
New Personal Deductions Under the OBBBA (2025–2028)
The OBBBA introduced four new personal deductions available for the 2025 through 2028 tax years. These are claimed on the new Schedule 1-A (Additional Deductions), and you can take them even if you claim the standard deduction:
1. No Tax on Tips (up to $25,000)
If you have a freelance side gig in a traditionally tipped profession — bartending, food service, hospitality — you can deduct up to $25,000 in qualified tip income. The deduction phases out for MAGI above $150,000 (single) or $300,000 (married filing jointly). This applies only to tips received in occupations where tipping is customary and regular.
2. No Tax on Overtime
If you have a W-2 job alongside your freelance work and earn overtime pay, you may deduct qualified overtime compensation. Federal employees are also eligible. This deduction has the same income phaseout as the tips deduction.
3. Car Loan Interest Deduction (up to $10,000)
You can deduct up to $10,000 in interest paid on qualified passenger vehicle loans. The vehicle must be a passenger automobile (not a motorcycle or RV), and the loan must be for the purchase of the vehicle. This is an above-the-line deduction — you don't need to itemize. The same $150,000/$300,000 income phaseout applies.
4. Enhanced Senior Deduction ($6,000)
Taxpayers aged 65 and older can claim an additional $6,000 deduction on top of the existing additional standard deduction for seniors. This benefits older freelancers who continue working past retirement age.
SALT Deduction Cap Raised to $40,000
For freelancers in high-tax states (California, New York, New Jersey, etc.), the State and Local Tax (SALT) deduction cap was raised from $10,000 to $40,000 for 2025. This covers state income tax, local taxes, and property taxes combined.
The cap will increase by 1% annually through 2029, then revert to $10,000 unless extended. For joint filers with MAGI above $500,000, the cap begins phasing down toward $10,000. If you live in a high-tax state and have significant property or state income taxes, you may now benefit from itemizing instead of taking the standard deduction — a calculation worth running with your tax software or accountant.
1099 Reporting Thresholds: What's Changed
The OBBBA also adjusted 1099 reporting thresholds, which affect both freelancers who receive 1099s and businesses that issue them:
| Form | 2025 Threshold | 2026 Threshold |
|---|---|---|
| 1099-NEC (Nonemployee Compensation) | $600 | $2,000 |
| 1099-MISC (Miscellaneous Income) | $600 | $2,000 |
| 1099-K (Third-Party Network) | $20,000 / 200 transactions | $20,000 / 200 transactions |
Important note for freelancers: even if a client doesn't send you a 1099 because the payment was under the threshold, you're still legally required to report all income you earn. The 1099 is an information return — it tells the IRS what the payer reported, not what you owe tax on. Your obligation to report income is independent of whether you receive a form.
Practical Checklist: What to Do Now
Here's a concrete action plan for freelancers navigating the 2026 tax season:
- Re-run your quarterly estimates. The Social Security wage base increase means higher SE tax if your income exceeds $176,100. Use our Quarterly Tax Estimator to recalculate.
- Maximize QBI-eligible deductions. Since QBI is calculated on net business income, every legitimate business expense you deduct also reduces the income subject to the 20% calculation. Track everything: home office, software subscriptions, professional development, business mileage at $0.70/mile (2025 rate).
- Accelerate equipment purchases. With 100% bonus depreciation restored, buying qualified business property in 2026 gives you an immediate full deduction. Run the numbers with our Deduction Finder to see what qualifies.
- Check if you qualify for the new deductions. If you earn tips or overtime, paid car loan interest, or are 65+, the new Schedule 1-A deductions could save you thousands — even if you take the standard deduction.
- Re-evaluate standard vs. itemized. The $40,000 SALT cap may make itemizing worthwhile if you're in a high-tax state with significant property taxes. Compare both methods.
- Maximize retirement contributions. SEP IRA and Solo 401(k) contributions can reduce taxable income while also affecting the QBI calculation. The defined-contribution limit is $70,000 for 2025 and $72,000 for 2026, before eligible catch-up contributions. See our SEP IRA vs Solo 401(k) guide for details, or the 2026 contribution limits by plan and age for the dollar caps.
- File Schedule 1-A if applicable. This is a brand-new schedule. Make sure your tax software supports it or your accountant is aware of the four new deductions.
Key Numbers at a Glance
| Provision | 2025 Value | 2026 Value |
|---|---|---|
| Standard Deduction (Single) | $15,750 | $16,100 |
| SS Wage Base Limit | $176,100 | $184,500 |
| SE Tax Rate | 15.3% | 15.3% |
| QBI Deduction | 20% (permanent) | 20% (permanent) |
| Bonus Depreciation | 100% | 100% |
| Section 179 Limit | $2,500,000 | $2,560,000 |
| SALT Deduction Cap | $40,000 | $40,400 |
| Mileage Rate (Business) | $0.70/mile | 72.5¢ Jan–Jun; 76¢ from Jul 1 |
| 1099-NEC Filing Threshold | $600 | $2,000 |
2026 federal figures were reviewed against IRS published guidance on September 12, 2026. State rules and individual eligibility may differ. The business mileage rate resets at mid-year; see how the 2026 two-tier business mileage rates work.
Ready to Put These Changes to Work?
The 2026 tax landscape is friendlier to freelancers than it's been in years — but only if you take advantage of the provisions. Start by recalculating your quarterly estimates with the new Social Security wage base, then run your deductions through our tools to see how much you can save.
Use our free Self-Employment Tax Calculator to estimate your 2026 SE tax, and our Deduction Finder to identify every write-off you qualify for under the new rules.
Sources
This guide draws on the following primary sources from the IRS and other U.S. government agencies. Figures are current for the 2026 tax year and are reviewed each time the IRS publishes updated inflation adjustments.
- Congress.gov, H.R.1 — One Big Beautiful Bill Act (Public Law 119-21)
- U.S. Government Publishing Office, Public Law 119-21 (full text)
- IRS, Working Families Tax Cuts (One Big Beautiful Bill Act tax provisions)
- IRS Revenue Procedure 2025-32, 2026 Inflation Adjustments
- IRS Publication 15 (2026), Employer’s Tax Guide — Social Security wage base