President Trump’s “Big, Beautiful” tax bill is getting a lot of press these days. As a freelance business owner, staying informed about potential tax policy changes is crucial for business planning and to ensure you are ready to take action if these proposed provisions are enacted. 

This summary of the bill’s provisions from a freelance business owner’s perspective is intended to help you stay informed and does not represent any actual tax changes. Please remember that it is not until the president’s tax bill is signed into law that you may need to take action. Watch for additional updates here, if and when that occurs. 

Currently, President Trump’s tax bill may impact freelance professionals in the following ways based on specific parts of the overall proposed legislation:

1. Extension of 2017 tax cuts and freelance income implications

One of the biggest aspects of Trump’s tax proposal is the extension of the 2017 Tax Cuts and Jobs Act (TCJA), which is set to expire at the end of 2025. For freelancers, this means continued access to lower tax brackets and business deductions.

Some potential impacts include:

• Lower individual tax rates: If the bill passes, freelancers will continue benefiting from lower tax rates rather than reverting to pre-2017 levels. 
• Reduced taxation of Overtime Pay: Currently taxed as regular income. The proposed plan makes overtime pay fully deductible from 2025 to 2028.
• Auto Loan Interest: Currently this is not deductible. The new proposal allows deductions up to $10,000, phasing out at a Modified Adjusted Gross Income (MAGI) of $100,000 (individuals) and $200,000 (joint filers).
• Pass-through income deductions: The 20% deduction for qualified business income (QBI) would remain, significantly reducing taxable income for freelancers operating as sole proprietors or LLCs.
• Standard deduction advantages: The nearly doubled standard deduction (from 2017) would continue, making it more attractive for freelancers who don’t itemize expenses.
• Clean Energy Credits: Current law provides $7,500 in EV credits and 30% for solar and clean energy investments. The new plan repeals or phases out most of these energy credits.

2. Tax-free tips and overtime pay for service-based freelancers

A unique proposal in Trump’s bill would eliminate taxes on tips and overtime pay, which could positively impact service-based freelancers such as gig workers, consultants, and independent contractors in hospitality and personal services.

How freelancers benefit:

• Higher take-home income: Those who rely on tips or bill overtime hours won’t have to pay taxes on these earnings.
• Gig workers gain a tax advantage: Uber drivers, food delivery workers, and service professionals could see increased earnings without additional tax liability.

3. Self-employment tax changes and Social Security deductions

Freelancers are subject to self-employment taxes, which include contributions to Social Security and Medicare. The proposed bill includes modifications that could impact tax liabilities.

Key changes for freelancers:

• Social Security tax exemption: Trump’s bill suggests eliminating federal taxes on Social Security benefits, which could be a long-term financial benefit for self-employed individuals planning for retirement.
• Self-employment tax adjustments: While details are still to be unveiled, there may be changes to Medicare tax contributions, affecting freelancers who earn above a certain threshold.

4. Increased state and local tax (SALT) deductions

The new tax bill includes an increase in the state and local tax (SALT) deduction limit, which could be beneficial for freelancers working in high-tax states.

What freelancers should consider:

• Higher SALT deduction cap: The proposed increase to $40,000 (from the current $10,000 cap) could provide relief for freelancers in states with high business and property taxes.
• Limited loopholes for deductions: Some workarounds, such as pass-through entities used by high earners, might face new restrictions.

5. Business deductions and tax credits for freelancers

Trump’s bill includes provisions that could either increase or restrict tax benefits for independent professionals. Here are the potential tax deductions and credits:

• Home office deductions remain intact: Freelancers who work from home can still deduct expenses related to office space, utilities, and equipment. 
• Expanded deductions for technology and education expenses: Business owners investing in new technology, education, and certifications may qualify for enhanced deductions.
• Possible changes to health insurance deductions: There is speculation about limiting deductibility of self-employed health insurance premiums, which could impact freelancers who purchase their own coverage.

6. Impact of tariff-funded tax cuts on freelance industries

Trump’s tax bill includes provisions that reduce taxes while increasing tariffs on imported goods to compensate for revenue losses. Freelancers in industries dependent on imports should pay close attention to see how any changes to tariffs may impact their businesses.

7. Retirement planning and freelancer financial strategies

Trump’s bill makes some adjustments to retirement savings and tax-exempt investments, which can influence long-term financial planning for freelancers.

How to prepare:

Monitor self-employed retirement account changes: Proposed tax adjustments could impact SEP-IRAs and solo 401(k) contribution limits.

Conclusion

Trump’s proposed tax bill presents both opportunities and challenges for freelancers. While extensions of previous tax cuts and new deductions could boost take-home earnings, potential reductions in healthcare deductions and tariff-related cost increases may require careful tax planning.

As tax policy discussions continue, stay informed and track legislative developments. If you have questions, consult a tax professional.