Trump, the IRS and Taxes: What Freelancers Really Need to Know
Perhaps the only certainty with the Trump administration's return to office is that there are likely to be tax reforms that may impact your freelance business. Keeping up to date with changes is important to avoid any negative tax implications.
Many of the tax changes which could affect freelancers have roots in policies established during Trump's first term, while there are others reflecting more recent developments since his return to office. Here is an overview of tax changes for 2025 and how Trump’s influence on tax policies may affect your freelance business:
- Social Security Wage Base Increase - The Social Security wage base has jumped to $176,100 in 2025 (up from $168,600 in 2024).
What this means for freelancers: As a freelancer, you pay both the employer and employee portions of Social Security tax (12.4% total) on all earnings up to this threshold. That means high-earning freelancers could pay up to $21,836.40 in Social Security tax alone. The 2.9% Medicare tax still applies to all your earnings without any cap, plus an additional 0.9% on income above $200,000 for single filers.
You may wish to adjust your quarterly estimated tax payments to account for this increase and avoid underpayment penalties.
- Higher Standard Mileage Rate - The standard mileage rate increased to 70 cents per mile in 2025 (up from 65.5 cents in 2024).
If you use your vehicle for business purposes, this 6.9% increase can mean significant tax savings. It is critical to keep detailed mileage logs so you can have proof of the business use of your vehicle in case of an IRS audit.
- Inflation-Adjusted Tax Brackets - The IRS has adjusted the federal income tax brackets for inflation, continuing the structure established by the Tax Cuts and Jobs Act:
Tax Rate | Single Filers (2025) | Married Filing Jointly (2025) |
|---|---|---|
10% | $0 - $11,600 | $0 - $23,200 |
12% | $11,601 - $47,150 | $23,201 - $94,300 |
22% | $47,151 - $100,525 | $94,301 - $201,050 |
24% | $100,526 - $191,950 | $201,051 - $383,900 |
32% | $191,951 - $243,725 | $383,901 - $487,450 |
35% | $243,726 - $609,350 | $487,451 - $731,200 |
37% | Over $609,350 | Over $731,200 |
As a freelancer, you should calculate your projected taxable income to determine which bracket you will fall into and plan your quarterly estimated tax payments accordingly.
- QBI Deduction Extension - This is one of the most valuable tax benefits from the Trump administration's first term. The 20% Qualified Business Income (QBI) deduction, originally introduced under Trump's Tax Cuts and Jobs Act (TCJA), continues to provide tax savings for eligible freelancers.
You may be able to deduct up to 20% of your business income if you qualify. For 2025, the income thresholds for the full deduction are $191,000 for single filers and $382,000 for married filing jointly. Phase-outs occur between $191,000-$241,000 (single) and $382,000-$482,000 (married).
A key point: If you are a "specified service business" (consultant, health professional, attorney, etc.), additional restrictions apply at higher income levels. Consider working with a tax professional to maximize this deduction.
- 1099-K Reporting Threshold - Despite proposals to raise it, the reporting threshold for third-party payment processors remains at $5,000 in gross payments for 2025. This means that payment platforms like PayPal, Venmo, Stripe, and Upwork must issue 1099-K forms if you receive $5,000 or more through their services annually. This lower threshold increases IRS visibility into your freelance income.
Make sure that your freelance business recordkeeping matches what is reported on your 1099-Ks to avoid triggering IRS notices.
The Potential Impact of Trump's IRS Restructuring on Freelance Businesses
The Trump administration's recent IRS restructuring initiatives have created both challenges and opportunities which may impact your freelance business:
- Reduced audit staffing: There is a projected 22% reduction in audit rates for small businesses and self-employed individuals in 2025. The focus has shifted toward high-net-worth individuals and large corporations. While this does not eliminate the possibility of an audit by any means, it does mean that freelancers may be less in the crosshairs of IRS scrutiny, that is unless your income is significantly above average.
- Customer service challenges: If you have an IRS issue or receive a notice related to your freelance business, expect longer wait times on the phone and slower processing of paper correspondence.
- Digital improvements: Despite staffing challenges, the IRS has implemented enhanced online account capabilities, digital income verification tools, and improved electronic filing options for freelancer-specific forms. However, you do want to make sure that any information you provide to the IRS is accurate otherwise you may end up paying more taxes than you should or facing fines and penalties. This is where working with a tax professional can be beneficial and help you avoid additional tax obligations or issues.
How Freelancers Can Take Advantage of Trump's Policies
Maximize Retirement Savings – Both the solo 401(k) and SEP IRA contribution limits have increased for 2025:
- Solo 401(k) increased to $70,000 for 2025, with an additional $7,500 catch-up for those fifty or older.
- SEP IRA contribution limits rose to $70,000 or 25% of net self-employment income, whichever is less.
Evaluate Your Business Structure - Reassess whether operating as a sole proprietor, S-Corporation, or LLC offers the optimal tax treatment. This is a decision that you should consult with a tax professional about because entity choice impacts eligibility for certain deductions, including the QBI deduction.
Health Insurance Considerations - Self-employed health insurance premiums remain 100% deductible as an above-the-line deduction. In addition, Health Savings Accounts (HSAs) contribution limits increased to $4,150 for individuals and $8,300 for families in 2025.
If you purchase Affordable Care Act (ACA) marketplace coverage, you can still qualify for the premium tax credit, which remains an important consideration. However, through 2025, the rules are slightly different. The 400% Federal Poverty Level (FPL) Subsidy Cliff was temporarily removed by the American Rescue Plan and extended through 2025 by the Inflation Reduction Act. Through 2025, if you make over 400% FPL, tax credits will gradually decrease as your taxable income rises, eliminating the sharp cutoff or ‘subsidy cliff’
Bottom Line
The 2025 tax landscape reflects both continuing policies from Trump's first term and new changes since his return to office. While certain Trump-era policies continue to benefit self-employed individuals, recent IRS restructuring initiatives have created a more complex environment requiring careful navigation. For the majority of freelancers, taking time to understand how these tax changes affect your business and partnering with a qualified tax professional can help you reduce your tax burden, remain in compliance, and take advantage of some of Trump’s positive tax policies that support the self-employed.