Tax season is officially here, and as a freelancer, beware that this year brings meaningful changes that will affect how you file your 2025 tax return. With new IRS updates, inflation adjustments, and shifting deduction rules, it’s more important than ever to understand what applies to you as you prepare your 2025 return. Remember, the earlier you complete your return, the better, especially if you are expecting a refund. 

The IRS has announced Monday, January 26, 2026, as the opening of the federal tax filing season, with Tax Day (the day your personal 2025 return is due) slated for April 15, 2026. If you operate your freelance business as a limited liability company (LLC) multi-member LLC, or C-Corporation entity, your business return is due on the same day. If you file your freelance business taxes as an S-Corporation your business return filings due March 15, 2026. 

As you start collecting your freelance tax documentation, it’s important to keep the federal and state-level deductions you may be entitled to in mind. Here’s a checklist of the key federal tax deductions you may be entitled to on your 2025 tax return. Be sure to check your state tax regulations for further tax deductions and obligations you and your freelance business may be subject to.

Increased Standard Deduction
One of the biggest changes for tax year 2025 is the increase in the standard deduction. If you typically itemize, it’s worth checking whether the higher standard deduction is more advantageous from a tax perspective. Here are the standard deduction amounts you can claim on your 2025 tax return:

• Single Filers: $15,750
• Married Couples Filing Jointly: $31,500
• Head of Household: $23,625

In addition, taxpayers aged 65 and older can now claim an additional $6,000 deduction per person through 2028. This senior deduction begins to phase out when MAGI (Modified Adjusted Gross Income) exceeds $75,000 ($150,000 in the case of a joint return). It will be in effect for the years 2025 through 2028.

Tip Income Deduction
If you work in a tipped profession (hospitality, beauty, wellness, etc.), you may deduct up to $25,000 in tip income from your federal income tax bill — due to the newly enacted “One Big Beautiful Bill Act” (OBBBA). This deduction begins to phase out with a modified adjusted gross income (MAGI) of $150,000 (for single filers) & of $300,000 (for filing jointly). It is completely phased out at $400,000 (for single filers) & $550,000 (for filing jointly). Please note that 2025 is considered as a transition year for these deductions, where employers are not required to report tips separately on tax forms until 2026, so employees/workers need to use reasonable methods to calculate their allowable deductions for 2025.

For the first time, qualifying freelancers can deduct up to $25,000 in tips from their taxable income starting in tax year 2025, but as of right now, this deduction only qualifies until 2028. 

Key point on tip income: While you can deduct tips from your taxable income, they still count toward your self-employment tax—the 15.3% you pay for Social Security and Medicare (for the self-employed or half of this if you are employed). The 15.3% tax rate is consisting of the 12.4% for social security and the 2.9% for Medicare (hospital insurance).There might be an additional Medicare Tax of 0.9% for Medicare Tax if your wages, compensation, or self-employment income (together with that of your spouse if filing a joint return) exceed the threshold amounts as follows: $250,000 (Married Filing Jointly), $125,000 (Married Filing Separately), $200,000 (Single, Head of Household with qualifying person, or Qualifying surviving spouse with dependent child).

Here’s the breakdown:

• Maximum Deduction: Up to $25,000 in qualified tips, but not more than your net income from the business where the tips were earned.
• Income Limits: The deduction phases out if your modified adjusted gross income exceeds $150,000 ($300,000 for joint filers).
• Qualifying Occupations: The Treasury Department’s preliminary list includes over 80 occupations across industries such as food service, personal care, entertainment, hospitality, home services, and transportation that qualify for the new tip income deduction. Some highlighted industries are:
• Food & Beverage: Bartenders, wait staff, cooks, dishwashers, and host staff.
• Personal Care & Wellness: Massage therapists, barbers, hairstylists, aestheticians, tattoo artists, and fitness instructors.
• Entertainment & Events: Musicians, dancers, DJs, ushers, and digital content creators (including streamers and podcasters).
• Home Services: Electricians, plumbers, HVAC installers, landscapers, and cleaners.
• Transportation & Delivery: Rideshare drivers, shuttle operators, valet attendants, and goods delivery workers.

Currently, the law excludes certain trades and businesses—such as health care, performing arts, and athletics—from claiming the deduction. You must keep meticulous records of your tip income including when it was received, from which client and for what services.

The SALT Deduction Cap is temporarily increased. The new “One Big Beautiful Bill” tax law temporarily raises the State and Local Tax (SALT) deduction cap. Here is a brief breakdown:

• Higher Deduction Limits (2025–2029): The maximum state and local tax (SALT) deduction is $40,000 for single filers, heads of household, and married couples filing jointly. This is a significant increase from previous year’s limit of $10,000. For married individuals filing separately, the new limit is $20,000.
• Phase-Out for High Earners: The benefit begins to phase out for taxpayers with Modified Adjusted Gross Income (MAGIof $500,000. The phaseout for those filing married filing separately starts at MAGI of $250,000. For every dollar over this threshold, the deduction is reduced by 30% of the excess MAGI. However, the cap cannot go below $10,000, no matter how high your income. So, taxpayers who fully phase out will still be able to deduct up to $10,000 for most tax payers, just like in previous year. Please note that just like the SALT cap, the MAGI phaseout threshold increases by 1% annually through tax year 2029. Thus, the phaseout will begin at $505,000 MAGI in 2026, $510,050 MAGI in 2027, and so on.
• Reversion in 2030: Unless further legislation is passed, the cap will return to $10,000 for joint filers and $5,000 for single filers.

It is recommended to review whether itemizing deductions provides greater value than taking the standard deduction, especially if your SALT payments will approach the new cap in 2026.

• Eligible Taxes: The deduction applies to a combination of state and local property taxes, and either state and local income taxes or general sales taxes.
•  Itemization Required: To claim the SALT deduction, you must itemize your deductions on IRS Schedule A instead of taking the standard deduction. For 2025, the standard deduction is $15,750 (single/married filing separately), $23,625 (head of household), and $31,500 (married filing jointly).
• Income Phaseouts: The benefit of the increased cap is reduced for higher-income earners. The $40,000 cap begins to phase out once your Modified Adjusted Gross Income (MAGI) exceeds $500,000 for all filers (or $250,000 for married filing separately). If your MAGI reaches $600,000, the deduction is capped at the original $10,000 limit.
• Temporary Provision: This increased cap is temporary and is scheduled to last from tax years 2025 through 2029. The cap amount will see a 1% annual increase from 2026 to 2029 and is set to revert to $10,000 in 2030 unless Congress takes further action. 

New Personal Car Loan Interest Deduction for individuals is a new deduction that  makes the interest on personal car loans a tax write-off ($10,000 maximum annual deduction limit under the Big Beautiful Bill’s No tax on car loan interest under Section 70203). To qualify for personal use car interest deduction, both the buyer and the vehicle must meet these specific criteria:

• Your Vehicle Must Be New: The deduction applies only to new (US assembled) vehicles, with the original use beginning with the taxpayer. Used vehicles and leases do not qualify.
• U.S. Assembly Required: The vehicle's final assembly must have occurred in the United States. You can verify this using the vehicle's window sticker, VIN, or the NHTSA VIN Decoder.
• Vehicle Type/Weight Limits: The vehicle must be a car, minivan, van, SUV, pickup truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds.
• Personal Use: The vehicle must be purchased for personal, non-commercial use.
• Loan Requirements: The loan must be originated after December 31, 2024, secured by a lien on the vehicle, and the interest must be paid during the tax year.
• Income Limits: The full deduction is available for taxpayers with a Modified Adjusted Gross Income (MAGI) of up to $100,000 (single filers) or $200,000 (married couples filing jointly). The deduction phases out gradually above these thresholds and disappears completely at $150,000 (single) and $250,000 (joint). 

Other Freelance Business Tax Deductions

In addition to the key new or modified deductions above, the following items in 2025 for are deductible for your freelance business (make sure you have appropriate documentation):

• Software
• Marketing expenses
• Attorney and other qualified professional services
• Equipment such as computers, printers and other hard goods
• Travel for legitimate business purposes 
  • Business travel expenses such as airfare, lodging, etc., are 100% deductible
  • Business meals are generally 50% deductible
  • Business related Vehicle expenses can be done through either of the two methods: (1) Actual Expenses method by deducting the business – use portion of costs such as gas, oil, insurance, car repairs, & lease payments; or (2) Standard Mileage Rate method that allows a deduction of business related tolls and parking fees, and a 2025 standard mileage rate of 70 cents per business mile.
• Subcontractor services
• Self-Employment Tax Deduction – you can deduct the employer-equivalent portion of 50% of your self-employment tax
• Qualified Business Income (QBI) Deduction – eligible freelancers can deduct up to 20% of their qualified business income, plus 20% of their qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. Please note that income earned through a C corporation or through services as an employee is not eligible for the deduction. Determination on what qualifies as a trade or business is in the instructions of Form 8995-A or Form 8995. Please note that eligible taxpayers can use the QBI deduction regardless of whether they itemize on Schedule A or take the standard deduction. The deduction is limited to the lesser of the QBI component plus the REIT/PTP component or 20% of the taxpayer’s taxable income minus net capital gain. 

More details on the two components are:

• QBI component – equals 20% of QBI from a domestic business operating as a sole proprietorship or through S corporation, partnership, trust or estate. It is subject to limitations, depending on taxpayer’s taxable income that may include trade or business, W-2 wages paid by qualified trade or business, and unadjusted basis immediately after acquisition (UBIA) of qualified property held by trade or business. This may also be reduced by the patron reduction if the taxpayer is a patron of an agricultural/horticultural cooperative.
• REIT/PTP component – equals 20% of qualified REIT dividends and qualified PTP income. It is not limited by W-2 wages or the UBIA of qualified property. Based on the taxpayer’s taxable income, the amount of PTP income may however be limited depending on the type of the PTP’s trade or business.

Health insurance premiums
Health insurance premiums can be deducted up to 100% of the premiums paid for medical, dental, and qualifying long-term care insurance for yourself, your spouse and dependents, provided you are not eligible for an employer-sponsored plan such as through a spouse’s job), copays, and expenses.

Retirement contributions
Retirement contributions to qualifies retirement accounts  are also tax deductible. If you have not already maximized your retirement contribution’s for 2025 in SEP IRA, SIMPLE IRA or other tax-advantaged retirement account, you can still make a contribution. 

Home office contributions
The IRS also allows for a home office space deduction at $5 per square foot of your office space, up to a maximum of $1,500 using the IRS simplified home office deduction. To qualify, your office space must be used regularly and exclusively for work, meaning it cannot double as a personal area. This doesn’t have to be an entire room—it can be a defined section of a room—but it must be dedicated solely to business activities.

In addition to exclusive use, the home office must serve as your principal place of business. 

The IRS offers the following two ways to calculate the deduction: 

1. The simplified method allows you to deduct $5 per square foot of office space, up to three hundred square feet, for a maximum deduction of $1,500.
2. The actual expense method lets you deduct the business percentage of real home expenses such as rent or mortgage interest, utilities, insurance, repairs, and depreciation. This percentage is typically based on the square footage of your office relative to your home. The calculation is done on IRS Form 8829.

It’s Time to Organize Your 2025 Freelance Tax Information

The filing window for taxes is almost open so now is the time to make sure your freelance accounting and tax information is up to date. If you plan to work with a tax professional, reach out and make sure you have a relationship established to ensure your taxes can be filed in a timely manner.

Spending a little time now to get your freelance tax information in order will allow you to file early and expedite any potential refund while giving you a head start on any additional tax moves you need to make in 2026 to reduce your tax burden.