Key Points
- Businesses only have to send a Form 1099-NEC to contractors they pay $2,000 or more in 2026, up from $600.
- Most Form 1099-MISC payments also moved to $2,000, but royalties stay at $10 and attorney gross proceeds stay at $600.
- Income under $2,000 is still taxable, and self-employment tax still starts at $400 of net earnings.
The 1099 threshold for freelance and contract work has increased from $600 to $2,000. However, the IRS says payments made before 2026 must keep the old $600 threshold. Payments made in 2026 can use the new $2,000 threshold.
The change hits hardest for people earning side hustle income from several small clients.
The higher threshold comes from the One Big Beautiful Bill Act, which was signed into law on July 4, 2025. That same law rewrote federal student loan borrowing and repayment.
According to the IRS, the $2,000 threshold for Forms 1099-MISC and 1099-NEC “may be adjusted for inflation beginning in calendar year 2027.”
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Why It Matters
Fewer tax forms will land in mailboxes next January, but the tax bill stays the same. A client that pays you $1,500 for design work in 2026 no longer has to send you a Form 1099-NEC. However, you still owe tax on that money.
The IRS states it plainly in its FAQs: “All income, no matter the amount, is taxable unless the tax law says it isn’t.” Our breakdown of self-employment tax shows how that money gets taxed.
The missing form creates a recordkeeping problem for freelancers. A 1099-NEC used to act as a built-in reminder of what each client paid. Now you’ll need your own invoices, bank deposits and payment app records to add up your income. Writers, tutors, photographers and gig workers who optimize their side hustle taxes already track this. Everyone else should start before year-end.
Personal payments were never part of these rules. The IRS 1099 page says no return is required when the payer “is not engaged in a trade or business.” A parent who pays a college student to tutor a child didn’t need to send a 1099 before 2026 and doesn’t need to now. The student still reports that income, just like the other ways to make money in college.
What Changed On Each Form 1099?
Most Form 1099-NEC and 1099-MISC payments now use a $2,000 threshold for payments made in 2026. The IRS instructions list several exceptions that did not change. Royalties still trigger a 1099-MISC at $10, and gross proceeds paid to an attorney still trigger one at $600. Direct sales of consumer products for resale keep their $5,000 threshold.
| Payment Type | Paid In 2025 | Paid In 2026 | Change |
|---|---|---|---|
| Nonemployee Compensation (1099-NEC) | $600 | $2,000 | Raised |
| Rents (1099-MISC) | $600 | $2,000 | Raised |
| Prizes, Awards And Other Income (1099-MISC) | $600 | $2,000 | Raised |
| Medical And Health Care Payments (1099-MISC) | $600 | $2,000 | Raised |
| Royalties (1099-MISC) | $10 | $10 | Same |
| Gross Proceeds Paid To An Attorney (1099-MISC) | $600 | $600 | Same |
| Payment Apps And Online Marketplaces (1099-K) | $20,000 And 200 Sales | $20,000 And 200 Sales | Same |
The Form 1099-K rules for payment apps such as PayPal and Venmo did not change in 2026. The same law reinstated the older 1099-K threshold, so payment apps only file when a payee receives more than $20,000 across more than 200 transactions. Payments taken by credit or debit card have no threshold at all.
Students running a small online resale business should still keep records, since profit from side hustles for college students is taxable.
What Does This Mean For Your 2026 Tax Return?
You still report every dollar of freelance income, with or without a 1099. Self-employment tax applies once your net earnings reach $400, at a 15.3% rate for Social Security and Medicare, according to the IRS self-employment tax page. You calculate it on Schedule SE, which we walk through here.
Here’s a worked example. A college student earns $1,800 building websites for two local businesses in 2026. Neither business has to send a 1099-NEC. If that $1,800 is all profit, the student owes about $254 in self-employment tax. That figure comes from applying the 15.3% rate to 92.35% of net earnings. That bill comes before any federal income tax, and the student reports the income on Schedule C either way.
Tax software can handle this without a 1099 in hand, since you can enter business income as a total. Our rankings of the best tax software compare which programs handle freelance income.
What Should Small Businesses Paying Contractors Do?
Businesses only need to file a Form 1099-NEC for contractors paid $2,000 or more during 2026. The IRS instructions say the form is due by January 31, and that date falls on a Sunday in 2027. That pushes the deadline to Monday, February 1, 2027.
A business with 10 or more information returns must file them electronically, according to the IRS 1099 filing page. Our tax center tracks other filing deadlines for the 2027 season.
Collecting a Form W-9 before the first payment still makes sense. A contractor paid $1,200 by October can easily cross $2,000 by December. The IRS instructions say the threshold for backup withholding also rose to $2,000. A small business that hires freelancers for one-off projects will file fewer forms, but it still needs a taxpayer ID number on file for anyone who might cross the line.
How This Connects
The One Big Beautiful Bill Act touched almost every part of The College Investor’s coverage, from student loans to college savings to taxes. Our look at the winners and losers in the Big Beautiful Bill covered the education changes.
The 1099 change is one of the few that cuts paperwork for young workers and side hustlers, though their tax bill stays the same.
What’s Next
Forms for 2026 payments arrive in early 2027, and they will look thinner for many freelancers. The IRS will publish the inflation-adjusted threshold for 2027 payments in Publication 1099. Freelancers who expect to owe should check the IRS estimated tax rules before the January 15, 2027 payment date. When filing season opens, tax software built for students can handle Schedule C income.
Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.