Tax Planning

Tax Planning Tips for Self-Employed and Gig Workers under OBBB

Taxpayers in the gig economy can take advantage of new deductions—like no tax on tips, overtime, and car loans—and increased standard deductions under recent legislation.

By NomadicTax Research Team • 5-8 min read • July 7, 2026

## What’s New for Gig Workers under the One, Big, Beautiful Bill (OBBB) Several structural changes provide tax-saving opportunities for **gig economy workers, freelancers, and self-employed** individuals: - Up to **$25,000 deduction** from taxable income for *qualified tips*, whether you itemize or take the standard deduction. ([irs.gov](https://www.irs.gov/newsroom/the-working-families-tax-cuts-what-gig-economy-workers-should-know?utm_source=openai)) - Deductions for **qualified overtime compensation** and **certain car loan interest** may also be available, along with an enhanced deduction for seniors. These are laid out in new Schedule 1-A for **tax year 2025** returns. ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai)) - The standard deduction amounts are rising for **tax year 2026**: $16,100 (single), $32,200 (married filing jointly), $24,150 (head of household). ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai)) ## Real-World Examples - **Tipped gig worker**: A rideshare driver who earns $20,000 in tips and meets the occupation definitions can deduct the full amount from income before regular tax rates apply. If their MAGI exceeds $150,000 (single) or $300,000 (joint), phase-out rules begin. ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai)) - **Overtime worker**: Backup gig workers paid overtime can similarly claim deductions up to $12,500 (single), $25,000 (MFJ), depending on MAGI limits. ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai)) ## Actionable Strategies - **Track tip income rigorously**: Keep detailed logs or use platforms that automatically provide tip statements. Verify that your occupation qualifies under IRS regulations. - **Document overtime pay**: If paid under FLSA, ensure compensation exceeding the regular rate is properly documented. - **Consider whether to itemize**: Because many of these deductions apply whether you itemize or not, the standard deduction increase may make itemizing less beneficial—but deductions like qualified tips might still push you over that threshold. - **MAGI planning**: Be aware of phase-outs above $150,000 (single) or $300,000 (MFJ). Doing work via entities or shifting income/timing may help. - **Adjust estimated tax planning**: Deductions will reduce your taxable income—but your estimated taxes still should account for new obligations like remittance taxes if applicable. ## Risks to Watch - Failing to report tips or document overtime could trigger audits or disallowances. - Occupation definitions matter: The IRS is proposing regulations spelling out which jobs qualify for the tips deduction. Until finalized, reliance on proposed lists carries uncertainty. - Misalignment with employer withholding, if classified incorrectly. ## Planning Checklist Before Filing - Collect all tip records and overtime compensation information. - Identify whether your MAGI is below phase-out thresholds. - Review Schedule 1-A and instructions in the 2025 Form 1040. - If recently self-employed, consult whether incorporating or forming an S-Corp or LLC could shift liability or tax bracket. With these changes, staying informed and documenting carefully can yield meaningful savings—and protect you if compliance is challenged.