What Is the One Big Beautiful Bill Act (OBBBA)?
The One Big Beautiful Bill Act was signed into law in 2025 and took effect for the 2026 tax year. It extended and made permanent several provisions from the 2017 Tax Cuts and Jobs Act, added new deductions for tipped workers, and updated reporting thresholds. For 1099 contractors and self-employed workers, OBBBA is the most significant tax legislation since 2017.
Key OBBBA Changes for 1099 Workers
New 2026
No Tax on Tips — Up to 5,000 Federal Deduction
Eligible workers can now deduct up to 5,000 in tips from their federal taxable income. Qualifying occupations include delivery drivers, restaurant workers, hotel staff, salon workers, and other service workers who customarily receive tips. If you earned 2,000 in tips as a DoorDash or Uber Eats driver in 2026, that full amount is excluded from your federal taxable income. You still report the tips as income but the deduction offsets them. State tax treatment varies — check your state rules separately.
Now Permanent
QBI Deduction — 20% of Net Business Income, Made Permanent
The 20% Qualified Business Income (QBI) deduction is now permanent. Before OBBBA it was set to expire after December 31, 2025. Every self-employed worker and independent contractor with a pass-through business can deduct 20% of their qualified net business income. On 0,000 net profit that is a 0,000 deduction — reducing your taxable income to 0,000 before any other deductions. Income limits apply above 97,300 (single) and 94,600 (married filing jointly) for 2026.
Restored 2026
100% Bonus Depreciation — Deduct Equipment Immediately
100% bonus depreciation is restored and made permanent. You can now deduct the full cost of qualifying business equipment in the year of purchase instead of depreciating it over several years. Qualifying purchases include vehicles used for business, computers, phones, cameras, delivery bags, and other equipment. This was phased down to 60% in 2024 and 40% in 2025 — OBBBA restores it to 100% starting in 2026.
Raised 2026
1099-NEC Reporting Threshold Raised to ,000
Companies are now only required to issue a 1099-NEC if they paid you ,000 or more in 2026, up from the previous 00 threshold. If a client paid you ,500 in 2026 they are not required to send a 1099-NEC. However, you are still legally required to report all income on your tax return regardless of whether you receive a form. The IRS expects full reporting of all self-employment income.
Raised 2026
SALT Deduction Cap Raised to 0,000
The State and Local Tax (SALT) deduction cap was raised from 0,000 to 0,000 for 2026. This is most impactful for self-employed workers in high-tax states like California, New York, New Jersey, and Illinois who itemize deductions. If you pay significant state income tax and property tax, you can now deduct substantially more on your federal return. This benefit phases out at higher income levels.
OBBBA 2026 — Quick Reference Table
| Change | Before OBBBA | After OBBBA 2026 |
|---|
| No Tax on Tips | Tips fully taxable | Up to 5,000 federal deduction |
| QBI Deduction | 20% — expiring after 2025 | 20% — now permanent |
| Bonus Depreciation | 40% in 2025, phasing out | 100% — restored and permanent |
| 1099-NEC Threshold | 00 | ,000 |
| SALT Deduction Cap | 0,000 | 0,000 |
| Mileage Rate | /usr/bin/bash.70/mile (2025) | /usr/bin/bash.725/mile (2026) |
| SE Tax Rate | 15.3% | 15.3% (unchanged) |
What OBBBA Means for Gig Workers
For delivery drivers, rideshare drivers, and other gig workers who earn tips, the No Tax on Tips deduction combined with the permanent QBI deduction creates the largest combined deduction opportunity in years. A DoorDash driver earning 0,000 gross with 0,000 in tips and 5,000 in mileage deductions could reduce their federal taxable income to approximately 1,000 after all deductions — dramatically reducing their tax bill.
- +No Tax on Tips: up to 5,000 deduction for eligible tipped workers
- +QBI: permanent 20% deduction on net business income
- +Mileage: /usr/bin/bash.725 per business mile in 2026
- +Bonus depreciation: deduct full cost of equipment immediately
- +SALT: deduct up to 0,000 in state and local taxes if you itemize
- +1099-NEC threshold: fewer forms to track at ,000 limit
FAQ — OBBBA 2026 for 1099 Workers
Does No Tax on Tips apply to Uber Eats and DoorDash drivers?
Yes. Delivery drivers who receive tips from customers qualify as eligible workers under OBBBA. Tips received through the app or in cash both count. The deduction covers up to 5,000 in tips per year and directly reduces your federal taxable income.
Do I still owe self-employment tax on my tips?
The No Tax on Tips deduction reduces your federal income tax but does not eliminate self-employment tax on tips. SE tax (15.3%) may still apply to tip income. Consult a CPA to calculate your specific liability.
Can I use QBI and No Tax on Tips together?
Yes. Both deductions can be claimed on the same return. You subtract the No Tax on Tips deduction from gross income first, then apply the 20% QBI deduction to your net qualified business income. Combined with mileage and other deductions, these can significantly reduce your total tax bill.
If I earned ,800 from a client will I get a 1099-NEC?
No. Under the new ,000 threshold, the client is not required to issue a 1099-NEC for payments under ,000. However, you must still report the ,800 as self-employment income on your tax return.
Disclaimer: This page is for informational purposes only and does not constitute tax advice. Tax laws are complex and individual situations vary. Consult a licensed CPA or tax professional for advice specific to your situation. Not affiliated with the IRS or any government agency.