If in case you have been listening to the headlines, you already know that the tax panorama has simply shifted—once more. On July 4, 2025, President Trump signed a main tax reform package deal into legislation, informally referred to as the “One Huge Lovely Invoice Act.”
Now that the “Huge Lovely Tax Invoice” is legislation, it is very important perceive what has modified and methods to put together for the 2025 tax 12 months and past. The Act completely extends many provisions from the Tax Cuts and Jobs Act (TCJA), together with the elimination of private exemptions. Under is a abstract of the important thing provisions in the invoice affecting freelancers and the way they differ from earlier tax legal guidelines.
Commonplace Deduction Will get a Increase
Some of the notable modifications is the rise in commonplace deduction. For 2025, the deduction quantities have risen to $31,500 for joint filers, $23,625 for heads of family, and $15,750 for single filers. This alteration gives a better revenue exclusion for many who don’t itemize their deductions, probably reducing taxable revenue. For a lot of freelancers who don’t have giant mortgage curiosity or medical bills, this can be a welcome simplification that reduces each paperwork and tax legal responsibility.
Two different particular person submitting notes:
- The brand new invoice reverts tax charges again to 2018 ranges and,
- It gives a brief $6,000 deduction underneath Sec. 151 for particular person taxpayers who’re age 65 or older.
The senior deduction begins to section out when a taxpayer’s MAGI (Modified Adjusted Gross Revenue) exceeds $75,000 ($150,000 within the case of a joint return). It is going to be in impact for the years 2025 via 2028.
Expanded SALT Deduction Cap
The state and native tax (SALT) deduction cap has been elevated from $10,000 to $40,000 for the 2025 tax 12 months. This cover will enhance by 1% yearly by 2029 earlier than reverting to its earlier restrict in 2030. Nonetheless, this profit is phased out for higher-income taxpayers, so not all freelancers will be capable to take full benefit.
The cap is lowered by 30% of the quantity by which the taxpayer’s modified adjusted gross revenue exceeds a threshold quantity. That threshold quantity is $500,000 for 2025, with a one p.c enhance every year via 2029.
For these in high-tax states, this transformation may present significant reduction, however it’s crucial to additionally concentrate on how the potential state-level workarounds talked about under may impression you.
State-Stage SALT Workaround for Companies
In response to the SALT deduction cap, a number of states have applied workarounds to assist companies mitigate its impression. For instance, New York State has launched the Move-By means of Entity Tax (PTET), which permits companies to pay state taxes on the entity stage somewhat than the person stage. This workaround permits companies to bypass the SALT cap and probably cut back their total tax burden. The brand new federal invoice has no impression on these state-level workarounds. Nonetheless, freelancers working pass-through entities ought to at all times monitor the particular developments associated to SALT within the states the place they do enterprise carefully.
Tip and Additional time Revenue Deductions
Two new deductions have been launched which will profit freelancers working in service-based industries:
- First, the Tip Revenue Deduction permits as much as $25,000 in tip revenue to be deducted from taxable revenue with out itemizing. This deduction phases out at $150,000 in revenue.
- Second, the Additional time Deduction permits workers who obtain extra time pay to deduct as much as $12,500, with a phaseout starting at $100,000 in revenue. Whereas these deductions are particularly related to freelancers in hospitality, magnificence, or gig work, in addition they sign a broader shift within the tax code towards recognizing non- conventional revenue streams.
These deductions are at present set to run out after 2028, so freelancers ought to reap the benefits of them whereas they final.
1099-MISC Reporting Burden Reduction
The BBB goals to cut back the paperwork burden on small companies and employees receiving revenue from the gig economic system by rising the 1099-MISC reporting threshold for funds for providers carried out by an unbiased contractor or subcontractor from $600 to $2,000.
Certified Enterprise Revenue (QBI) Deduction Made Everlasting
Some of the vital modifications for freelancers is the everlasting extension of the 20% Certified Enterprise Revenue (QBI) deduction for pass-through revenue. For those who function as a sole proprietor, LLC, or S-corporation, you may proceed to deduct as much as 20% of your certified enterprise revenue, topic to revenue thresholds and enterprise kind. This deduction has been a significant profit for freelancers since its introduction in 2018, and its permanence provides much-needed stability to long-term freelance enterprise tax planning.
Expanded 529 Plans and “Trump Accounts”
Freelancers with youngsters could profit from two new provisions geared toward supporting household monetary planning.
- First, 529 Plans have been expanded to cowl Okay–12 and homeschooling bills, providing extra flexibility in how schooling financial savings can be utilized.
- Second, the invoice introduces “Trump Accounts,” new tax-favored financial savings accounts for newborns. These accounts are seeded with a $1,000 authorities contribution and are modeled after IRAs.
Whereas these provisions aren’t direct enterprise deductions, they provide new methods to handle household funds and cut back future tax burdens—notably for freelancers balancing enterprise possession with parenting obligations.
Vehicle Mortgage Curiosity
Beforehand, curiosity on a person’s car mortgage was handled as nondeductible private curiosity. The Act features a deduction of as much as $10,000 for curiosity paid on an car mortgage in 2025 via 2028 for a automobile bought after 2024. The deduction is accessible for each itemizers and non-itemizers.
Playing Revenue Faces Larger Taxes—and New Complexity
The 2025 tax reform introduces a controversial and probably devastating change to how playing winnings and losses are handled underneath federal tax legislation. Starting in 2026, gamblers will solely be allowed to deduct as much as 90% of their playing losses towards their winnings. This marks a big departure from the earlier rule, which allowed a full 100% deduction of losses—successfully taxing solely web winnings.
Underneath the brand new provision, even gamblers who break even or incur a web loss may face a tax invoice. For instance, a leisure gambler who wins $100,000 and loses $100,000 in the identical 12 months would now solely be capable to deduct $90,000 of these losses, leading to $10,000 of taxable revenue regardless of having no precise revenue. In a extra excessive case, a gambler who wins $500,000 and loses $500,000 could be taxed on $50,000 of phantom revenue.
Skilled gamblers are anticipated to be hit hardest. As a result of they usually function with excessive volumes and slender margins, the lack to totally deduct losses and enterprise bills may end in being taxed on revenue they by no means really earned. As an example, if an expert poker participant earns $500,000 in winnings, incurs $440,000 in losses, and spends $50,000 on business-related bills, they’d be taxed on $59,000 of revenue—almost six instances their precise web revenue of $10,000. This provision applies no matter whether or not playing exercise leads to a web achieve or loss. This successfully requires gamblers to earn not less than a ten% return on funding simply to interrupt even after taxes. If in case you have a contract playing enterprise or playing professionally as a aspect gig, now could be the time to seek the advice of a tax skilled.
What You Ought to Do Now
To take advantage of the brand new tax legislation, freelancers ought to take a number of proactive steps.
- Assessment your 2025 estimated tax funds to make sure they mirror the brand new deductions and charge modifications.
- Observe all revenue sources rigorously—particularly ideas and extra time—to help your eligibility for the brand new deductions.
- Maximize your QBI deduction by confirming that your corporation construction and revenue qualify.
- Plan forward for 2026 and past, as some provisions, such because the tip and extra time deductions, are set to run out after 2028.
Staying organized and knowledgeable will enable you to keep away from surprises and take full benefit of the alternatives out there underneath the brand new legislation. You should definitely look ahead to updates to those and different tax provisions which can impression your freelance enterprise.
New Tax Legal guidelines Can Profit Your Freelance Enterprise with Skilled Steering
The 2025 tax reform brings a mixture of advantages and challenges for freelancers. By understanding these modifications and planning accordingly, you may reap the benefits of new alternatives whereas minimizing potential liabilities. Because the implications of the invoice proceed to unfold, keep knowledgeable and seek the advice of with a tax skilled who understands the freelance economic system. With the suitable steering, you may guarantee your corporation stays compliant, environment friendly, and financially resilient within the years forward.
