Tax Tip 2026-26: Filing tips and updates for gig economy workers

Issue Number: Tax Tip 2026-26

Filing tips and updates for gig economy workers

Gig economy workers can reduce their tax bill and keep more of their income, because of provisions in the One, Big, Beautiful Bill.

What is gig economy?
The gig economy is an activity where people earn income for on-demand work, services or goods. Often, it’s through a digital platform like an app or website. Some examples include providing rideshare or delivery services, renting property, or selling goods online.

Income reporting requirements
Taxpayers must report income earned from the gig economy on a tax return, even if the income is:

• From part-time, temporary or side work
• Not reported on an information return form — like a Form 1099-K, 1099-MISC, 1099-NEC, W-2 or other income statement
• Paid in any form, including cash, property, goods, or virtual currency

Key updates

• Deduction for tips: This is a new deduction and is available from tax year 2025-2028. Currently, there is a list of nearly 70 occupations of tipped workers that qualify.
  • Gig workers can now deduct up to $25,000 in tips from their taxable income each year from 2025 through 2028. This limit applies per tax return for both single filers and married couples filing jointly.
  • Self-employed workers may deduct qualified tips up to the amount of their net income from the trades or businesses in which they were received.
  • Qualified tips must be reported on Form W-2, Form 1099-MISC, 1099-NEC,1099-K, or reported directly by the taxpayer on Form 4137, to be eligible for the deduction. Even though these forms won’t show tip amounts separately in 2025, the tips must still be included in the total reported income.
• Qualified Business Income deduction: This deduction is now permanent allowing eligible gig workers to plan long term to maximize the benefit. Certain tip income may be excluded when computing QBI.
• Form 1099-K reporting rules: The law restores older reporting rules for payment apps and online marketplaces. Taxpayers will receive Form 1099-K if they receive more than $20,000 and have over 200 transactions in a year. Taxpayers must report all income when they file their tax return regardless of whether they receive a Form 1099-K or other information return.
• Bonus depreciation: Gig workers can now deduct 100% of the cost of certain business equipment like vehicles or computers if it was acquired after Jan. 19, 2025. It must be in the first year of use and used more than 50% for business.

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