How the New Tax Law Impacts Solos

On July 4, 2025, a new budget reconciliation law was passed–officially known as the One Big Beautiful Bill Act–containing hundreds of changes to tax and spending policies. 

The 940 page piece of legislation covered things as big as making the 2017 tax cuts permanent to things as small as creating tax cuts for whaling captains in Alaska. 

Here are a few things that are a part of this law that are the most relevant for businesses-of-one.

Tax Changes That Impact Solos

While the bill had plenty of changes to the tax code, most would impact your personal filing, not your business filing. Here are some call-outs for self-employed professionals.

The 199A Qualified Business Income Deduction is Now Permanent

The QBI deduction is a complex tax savings opportunity that was introduced in 2017. It lets many solopreneurs and small business owners deduct up to 20% of their business income, but the rules are complicated, with different outcomes depending on your income level, industry, and whether you’re an LLC or S Corp.

This deduction is now permanent and has a higher phase-out threshold. Generally speaking, lower-income solos will get a better QBI deduction with an LLC. But at higher income levels, S Corps will come out ahead. That’s because with an S Corp, you’re paying yourself a salary, which does not count towards your qualified business income.

Luckily, you don’t have to figure all this out yourself. Lettuce automatically handles your tax strategy–including your QBI deduction–and ongoing compliance so you get the biggest possible tax break without the guesswork.

The State and Local Tax Deduction (SALT) is Back Up

If you’re a high-earner in a high-tax state, you’re set to save big. In 2017, the deduction for State and Local Taxes you paid (SALT) was dropped to $10,000 for married couples filing jointly and $5,000 for individuals. Now, the new law has temporarily raised the SALT deduction limit to $40,000 starting in 2025. That benefit starts to phase out, or decrease, for people who earn more than $500,000 of income. Both figures will increase by 1% yearly through 2029 and the higher limit will revert to $10,000 in 2030. 

Tax Deductions for Tips and Overtime?

Two of the buzziest deductions probably don’t work for most businesses-of-one. There is a $25,000 deduction for qualified tips that’s allowed even if you take the standard deduction. But you can’t just start converting part of your invoices to “tips.” This deduction is only eligible for cash tips for businesses that traditionally collect them, like the food and beverage industry, beauty services, and casino employees. Industries like consulting, healthcare, and financial services are all expressly exempt.

There’s also a new deduction for overtime, but no, you cannot pay yourself overtime through your S Corp salary. Overtime is only available for certain classifications of workers, and as an executive of your own business, you’re considered exempt.

Reductions in Paperwork

If you’re a solo, you’re used to 1099s. While you’re always required to pay taxes on any income, the reporting thresholds are changing.

The 1099K Threshold has Increased

If you’re a solo who gets paid through payment processing apps like PayPal or Venmo, under the current law in 2025 you would receive a 1099K outlining that income if you earned over $2,500 from a platform–which was decreasing to $600. The minimum threshold is now $20,000 or 200 transactions. 

1099-MISC and 1099-NEC thresholds are Increasing in 2026

Currently, any contractor that’s paid $600 or more is required to get a 1099 MISC or NEC. That reporting threshold will go up to $2,000 starting in 2026, with annual inflation adjustments. 

Changes to S Corps

None. S Corps continue to be a smart tax strategy for businesses-of-one and a consistent part of the U.S. tax code. If you’re still considering changing your tax election status for this year, you can be confident that you’ll be locking in a secure strategy for your business. 

Ready to manage your taxes with less stress and more success? Get started with Lettuce today.