IRS updates for gig workers: tip deduction, 1099-K threshold, and QBI

What the IRS fact sheet covers

According to IRS FS-2026-07, certain provisions signed into law on July 4, 2025, change how many gig workers plan taxes for 2025 through 2028. The page is an official newsroom summary, not a substitute for forms, publications, or professional advice. Dates and proposed regulations can change after release — verify on irs.gov before relying on any one rule.

Tip deduction up to $25,000

The IRS describes a deduction that allows eligible gig workers to deduct up to $25,000 in qualified tips from taxable income for tax years 2025 through 2028 ($25,000 per return for single filers and married couples filing jointly). Proposed regulations list nearly 70 occupations of tipped workers; the IRS notes it is working on a finalized list.

For self-employed workers, the fact sheet says qualified tips may be deducted up to net income from the trades or businesses where those tips were received, and tips must be reported on Form 1099-MISC, 1099-NEC, or 1099-K to be eligible. The IRS also notes those forms will not separately identify qualified tip amounts for 2025 — tip amounts still need to be included in totals reported on the forms.

1099-K threshold: $20,000 and 200 transactions

The IRS states that the law retroactively reverted the Form 1099-K reporting threshold for third-party settlement organizations (payment apps and online marketplaces) to more than $20,000 in payments and more than 200 transactions in the calendar year. That replaced the much lower thresholds that had been scheduled under earlier law.

The same fact sheet is blunt: taxpayers must report all income when they file, whether or not they receive a Form 1099-K. A higher reporting threshold is not a free pass. Platforms and states may still issue forms below the federal TPSO threshold in some cases.

Permanent QBI and bonus depreciation

The IRS notes the Qualified Business Income deduction is now permanent, which helps long-term planning for eligible gig workers. Certain tip income may be excluded when computing QBI under the fact sheet's summary — another reason to involve a preparer.

Bonus depreciation: the law allows 100% bonus depreciation on certain assets acquired after January 19, 2025, for qualifying property used more than 50% in the business (vehicles and certain computers are examples in the IRS write-up). First-year deductions can look large on paper; cash for the purchase still has to come from somewhere.

What this means for your math

These rules change tax planning inputs. They do not change net hourly. A $90 Flex block or a $74 DoorDash night still needs miles, waiting, and hours in the denominator. A tip deduction may raise spendable cash after filing — it does not make vehicle wear free.

• Keep tip and payout logs that match what platforms report.
• Continue a tax reserve habit until a preparer adjusts your percent.
• Treat 1099-K absence as a paperwork detail, not proof income is untaxed.
• Run after-tax side income with conservative assumptions before you cut reserve.

Read the original

This page is Sidequity commentary on IRS FS-2026-07. Read the original IRS newsroom article for full wording and links to Working Families Tax Cuts materials. We do not provide tax advice.