The 2026 freelance tax reset, decoded

The biggest change to small business taxes in a decade arrived quietly. The One Big Beautiful Bill Act, signed in July 2025 and effective January 1, 2026, rewrote enough of the freelance tax code that most of my clients now ask the same question on the same call. Does this actually change what I do, or is it just noise?

The honest answer is some of both. A few of the new rules will save freelancers real money if they restructure how they bill or save. A few sound bigger than they are. Here is the actual list, with the order of operations a one person business should think through.

This is general information, not tax advice. Specifics depend on your state, your structure, and your situation. Sit down with an accountant before you act on anything that matters.

The QBI deduction is now permanent, and slightly better

This is the single most important change. The 20% qualified business income deduction was supposed to expire at the end of 2025. Instead, it was made permanent and expanded.

Three things to know:

1. The deduction rate is now 23%, up from 20%. For a freelancer with $80,000 of qualified business income, that is the difference between a $16,000 deduction and an $18,400 deduction. At a 24% marginal rate, real cash in your pocket of about $575 a year.
2. There is a new minimum deduction of $400 for anyone with at least $1,000 of qualified business income. Small, but it means lower earning freelancers and side hustlers now get something where they often got nothing.
3. The income phase-in thresholds are higher. The deduction now begins to phase out for specified service businesses at $75,000 of taxable income for single filers and $150,000 for joint filers, with full phase-out at higher levels.

If you are a freelancer in a "specified service trade or business" (consulting, law, accounting, health, performing arts, and similar), the phase-out still applies and is still meaningful. If you cross the threshold, every dollar above it costs you a little bit of the deduction. This is the one place where income smoothing across years can be worth real money.

What to do: nothing different than you should already be doing, but be aware that the deduction is now a stable feature of the tax code rather than something that might expire. Plans built around it are safer.

The 1099 threshold jumped from $600 to $2,000

For decades, you owed your contractors a 1099-NEC if you paid them $600 or more in a year. As of 2026, that threshold is $2,000. Adjusted for inflation thereafter.

What that means in practice:

1. Fewer 1099s to send. The freelancer who occasionally hires a small contractor for a single project will often fall under the new threshold.
2. The reporting obligation has not been eliminated. You still must report the payments as business expenses. You just are not required to issue the 1099 form itself if total payments to that contractor are under $2,000.
3. Your contractor still owes tax on what you paid them. The threshold change does not change their obligation, only your paperwork.

The trap I see clients fall into: assuming the threshold change reduces their record keeping burden. It does not. The IRS still expects you to substantiate every business expense if asked. If you paid a designer $1,800, you still need the invoice, the proof of payment, and ideally a written agreement. The only thing that changed is whether you mail them a 1099 in January.

State thresholds may differ. Several states (California, New Jersey, Massachusetts, and a handful of others) have lower thresholds for state level information reporting and have not moved them. Check your state.

Bonus depreciation is back at 100%

If you bought equipment, software, or other qualifying business property after January 19, 2025, you can deduct 100% of the cost in the year you placed it in service, instead of spreading it across multiple years.

This matters less than it sounds for most freelancers, because most of us were already using Section 179, which has long allowed first year expensing of most small business equipment up to a generous limit. For a one person business spending under $1.2 million a year on equipment (which is to say all of us), Section 179 already covered the relevant ground.

Where bonus depreciation actually moves the needle: if you buy a vehicle, a piece of capital equipment over the Section 179 limit, or business real estate improvements. None of these are common for a freelancer with a laptop and a desk. For most readers of this site, this is technically nice and practically irrelevant.

The self-employed health insurance deduction stays

This was a minor concern leading up to the bill. The deduction for health insurance premiums paid by self-employed people remains in place. You can still deduct premiums for yourself, your spouse, and your dependents as an adjustment to income on Schedule 1.

The deduction is limited to your net self employment earnings, so it cannot create a loss. If you are running thin margins, plan accordingly.

What did not change but is worth restating: the deduction is taken above the line, before AGI, which means it also reduces your modified AGI used to calculate ACA subsidies. With the ACA subsidy cliff back in 2026 (the enhanced credits expired at the end of 2025), the health insurance deduction is doing more work for you than it used to, even though the rule itself is unchanged.

Quarterly tax dates and safe harbor calculations are unchanged

The quarterly estimated tax framework is exactly the same as it was. April 15, June 15, September 15, January 15. Safe harbor still requires you to pay 100% of last year's federal tax liability, or 110% if last year's AGI was over $150,000.

If you were using the safe harbor calculation last year, keep using it this year. The math is unchanged. The only adjustment is that the 2026 federal income tax brackets shifted slightly with inflation, which they do every year.

Things people are asking about that mostly do not matter

A handful of changes have generated more attention than they probably deserve for the average one person business.

The R&D expensing change. Software developers spent the back half of 2024 panicked about Section 174, which required R&D to be amortized over five years instead of expensed. The OBBBA restored immediate expensing for domestic R&D. If you are a freelance developer who was forced to capitalize software development costs last year, you can probably go back to expensing them. Talk to your accountant. For most freelancers, this is a non issue.

Pass through entity tax (PTET) elections. Useful if you are operating as an LLC taxed as an S corp in a high tax state and want a federal workaround for the SALT cap. Specialized. If you are not already doing it, you probably do not need to start. If you are doing it, your accountant has already adjusted.

The estate tax exemption. Permanently raised. Mostly irrelevant unless you have a multimillion dollar estate, in which case you have a different accountant than the one writing this article.

What I actually tell clients to do for 2026

For most one person businesses, the to do list looks like this.

1. Reconfirm your QBI deduction is being applied correctly on your tax return. Most software does this automatically, but it is worth a glance.
2. Update your contractor records to flag who you have paid more than $2,000 to in the current year. Set the trigger to issue 1099s based on the new threshold.
3. If you were doing income smoothing to stay under the QBI phase-out threshold, recheck the numbers with the new $75,000 / $150,000 floors.
4. If you bought significant equipment after January 19, 2025, ask your accountant whether bonus depreciation gives you a different first year deduction than Section 179.
5. Keep the rest of your habits the same. Quarterly payments, the tax savings account, the weekly bookkeeping. None of that changes.

The way I usually frame this with clients: the OBBBA is mostly a stabilization act, not a reinvention. It locked in changes that were going to expire and made a few of them slightly better. The day to day of running a small business in the US tax code looks almost identical to what it looked like a year ago. The fact that this is news is largely because it could have looked very different, and now it does not.

That is a good outcome. Boring is the right adjective for tax law. Boring means predictable, predictable means plannable, and plannable is the entire point.