Digital Nomad
What Gig Workers Need to Know About Deductions and the New Tax Law
The Working Families Tax Cuts law has permanently expanded deductions for gig workers—learn what's new and how to maximize your savings.
By NomadicTax Research Team • 5-8 min read • July 30, 2026
## The Changing Tax Landscape for Gig Workers
The **Working Families Tax Cuts (P.L. 119-21)**, signed into law on July 4, 2025, introduced major changes for gig workers. Many are now permanent, which allows better long-term tax planning. Key provisions include:
- A deduction for **qualified tips**, up to **$25,000 per return** for individual filers and joint filers. To use this deduction, tips must be reported on Form 1099-MISC, 1099-NEC, or 1099-K. ([irs.gov](https://www.irs.gov/newsroom/the-working-families-tax-cuts-what-gig-economy-workers-should-know?utm_source=openai))
- Making the **Qualified Business Income (QBI)** deduction permanent for eligible gig workers. Some of your tip income may be excluded when calculating QBI. ([irs.gov](https://www.irs.gov/newsroom/the-working-families-tax-cuts-what-gig-economy-workers-should-know?utm_source=openai))
- **Form 1099-K reporting thresholds** have reverted to pre-American Rescue Plan Act levels: $20,000 in payments plus more than 200 transactions per year. However, keep in mind, you must report all income regardless of whether you receive a 1099-K. ([irs.gov](https://www.irs.gov/newsroom/the-working-families-tax-cuts-what-gig-economy-workers-should-know?utm_source=openai))
- **100% bonus depreciation** is available for qualifying business assets acquired after January 19, 2025. Needs to be used over 50% in business. Great for assets like computers or vehicles. ([irs.gov](https://www.irs.gov/newsroom/the-working-families-tax-cuts-what-gig-economy-workers-should-know?utm_source=openai))
## Practical Tips for Gig Workers
- **Keep clear records of tip income.** While 1099 forms may combine all income, you should track tips separately to use the deduction and QBI correctly.
- **Beware the phase-outs.** Some deductions are limited by income. Know your Modified Adjusted Gross Income (MAGI).
- **Deduct fully business-used assets.** If an asset is more than 50% business-used, you may use first-year bonus depreciation. Example: an auditor buys a laptop used 60% for work; the cost may be eligible in first year.
## Example Scenario
Luis drives for a rideshare app. In 2025, he earns $75,000, of which $5,000 is in customer tips. Under new rules, he can deduct the $5,000 qualified tips. He also replaces an old work laptop with a new one used 70% for business—he may deduct the business-portion under bonus depreciation.
## Watchouts & Planning Opportunities
- If your income fluctuates, consider strategies like deferring income or accelerating deductions before entering phase-out ranges.
- Ensure you have **proof of payments**, deposit receipts, contracts or logs, especially for tip income.
- Use reliable software or a professional to ensure properly fill out new forms (e.g., Schedule 1-A for special deductions).
## Bottom line
The Working Families Tax Cuts law gives gig workers new permanent deductions and more predictable reporting thresholds. For anyone in the gig economy, understanding these changes can result in big savings—not only this year, but for years to come. If unsure, schedule a consult with a tax pro to map these changes onto your unique income profile.