The One Big Beefy Bill

Only July 4, 2025 the One Big Beautiful Bill became law. The name sounds like something dreamed up at a branding retreat, but for freelancers, contractors, and gig workers it might actually live up to the hype the Trump administration promised. The bill rewrites some of the oldest part of tax law that affect 1099 workers and gives a few new deductions that could make tax season less painful.

The New 1099 Thresholds

For decades, businesses had to send you a 1099 form if they paid you more than $600. That rule was set in the 1950s and somehow never adjusted for inflation. $600 back then is more than $6,000 today.

The OBBBA (One Big Beautiful Bill Act) finally fixed it. Starting in 2026, the threshold for 1099-NEC and 1099-MISC jumps to $2,000. If a client pays you $1,500 for a project, they no longer have to send a form. If they pay you $2,500, they do. The threshold will adjust for inflation each year after 2027.

The backup withholding threshold also goes up to $2,000. That means if you forget to give a client your taxpayer ID, they only have to withhold if they pay you more than that.

For third-party platforms like PayPal or Venmo, the OBBBA rolls the rules back to the old standard. A 1099-K now only goes out if you have more than $20,000 in payments and over 200 transactions. That is a relief for people who got caught up in the planned $600 threshold that would have buried freelancers in paperwork (even most Venmo users have more than that over a year.)

New Deductions for Tip and Overtime Income

The bill adds two temporary deductions that run from 2025 through 2028.

• Tip income deduction. If you work in an industry where tips are standard, you can deduct up to $25,000 of tip income each year. This phases out once your adjusted gross income hits $150,000, or $300,000 for joint filers. This is huge for content creators as they are now included in this group!
• Overtime deduction. If you put in overtime hours and get the premium pay (the “half” in time and a half), you can deduct up to $12,500 of that premium each year, or $25,000 if you file jointly. Same income limits apply.

For freelancers who split time between 1099 work and tipped or shift jobs, this could mean real money back. The deductions are limited and temporary, but for four years they will matter.

The QBI Deduction is Now Permanent

The Qualified Business Income deduction was set to expire at the end of 2025 (The QBI Deduction). That deduction lets most freelancers knock 20% off their taxable business income. The OBBBA makes it permanent.

That permanence matters. Before, you could not plan around it. Now you can. If you are a freelancer earning $80,000, the deduction could save you thousands each year, and you can count on it staying in place. The bill also raises the phase-in thresholds for service businesses and adds a $400 minimum deduction for anyone with at least $1,000 in qualified business income.

Lower Tax Rates Stick Around

The individual tax rates from the 2017 law were about to expire. That would have meant higher rates for everyone starting in 2026. The OBBBA keeps the lower rates permanently. For 1099 workers, that means more predictable planning instead of wondering what bracket you will land in next year.

SALT Deduction Cap Expanded

If you live in a high-tax state, the OBBBA temporarily raises the state and local tax (SALT) deduction cap from $10,000 to $40,000. That increase lasts from 2025 through 2029 and then drops back. It also phases out for high earners starting at $500,000 of income for joint filers.

For many freelancers, this will not change much. But for higher earners in places like New York or California, it could be a major deduction.

New Reporting Rules

There is a tradeoff. Employers and businesses now have to separately report qualified tip and overtime income on W-2s and 1099s. They also need to identify the occupation for tip earners. That means more detail in the paperwork you get each January, but it is tied to the new deductions.

Timeline of What Kicks in When

• 2025. Tip and overtime deductions begin. SALT deduction cap rises. QBI deduction becomes permanent.
• 2026. New $2,000 thresholds for 1099-NEC and 1099-MISC take effect.
• 2027. Inflation adjustments start for the $2,000 threshold.
• 2028. Tip and overtime deductions expire unless extended.
• 2029. SALT deduction cap ends after this year.
• 2030. SALT deduction cap returns to $10,000.

The Bottom Line and Why This Matters

For years, freelancers complained that tax law was stuck in the past. The OBBBA updates the system in ways that directly impact self employed people. The higher thresholds mean fewer 1099s cluttering your mailbox. The new deductions put more money in the pockets of tipped and hourly workers (streamers this includes you!) The permanent QBI deduction and extended rates give long-term planning stability.

There are still catches. The tip and overtime breaks are temporary. The SALT cap increase does not help everyone. And the IRS will be watching closely to make sure deductions are claimed correctly.

But overall, the OBBBA makes tax season a little less frustrating for the people who have to handle is all themselves. For once, the name might not be an exaggeration.

Keep on Creating!

— The Beluga Team