If you’re a physician, 1099 contractor, or you own a private medical practice, the new One Big Beautiful Bill Act (OBBBA) changes the tax landscape, some provisions forever, others just for a few years.
Below is a quick rundown of what this tax relief act for doctors means, when each change kicks in, and how to use the rules to keep more of what you earn.
Effective-date cheat sheet
Most items apply to income earned in 2025 (the return you’ll file in 2026). Temporary incentives noted below end after 2028 unless stated otherwise.
For Doctors and Practice Owners (Individuals)
| Topic | Key change | Planning angle |
| Individual tax brackets | The 10%, 12%, 22%, 24%, 32%, 35% and 37% brackets from the 2017 law are now permanent. | A married couple with $350k taxable income stays in the 24% bracket instead of rising to 28%. |
| Standard deduction | Locked in at $31,500 (MFJ) and $15,750 (Single) for 2025, indexed annually. | Many employed physicians will still itemize because of state taxes or mortgage interest, run the comparison each year. |
| Child Tax Credit | Bumps to $2,200 per child; up to $1,700 refundable and indexed to inflation. | Higher-income phase-outs unchanged; worth coordinating with retirement contributions to stay under the limits. |
| Overtime & tips deductions, temporary | 2025–2028: Overtime, deduct up to $12,500 (MFJ $25,000); must be FLSA-required OT. Tips, deduct up to $25,000 total (no MFJ doubling). Phase-outs begin at $150k / $300k AGI. Tips deduction is not available to health-care SSTBs (self-employed or employees). | Hospitalists and locums with qualified OT can cut taxable income; track hours. Most W-2 physicians are FLSA-exempt and will not have qualified overtime. |
| Senior bonus deduction, temporary | 2025–2028: Extra $6,000 deduction if 65+ and AGI under $75k / $150k. | Rare for full-time doctors, but useful for semi-retired physicians with part-time work. |
| SALT deduction boost, front-loaded | Cap is $40k for 2025, then increases about 1% per year through 2029 and reverts to $10k in 2030. For MAGI over $500k, reduce the cap by 30% of the excess MAGI, but never below $10k. | In high-tax states (CA, NY, NJ, etc.), consider pre-paying 2025 property and state taxes by 12-31-25; also evaluate PTET at the entity level. |
| 529 plan expansion | Funds can cover recognized credentialing costs (for example licensing exams or CME) when part of a recognized postsecondary credential program. | A tax-free way to fund maintenance of certification or new subspecialties, confirm the program qualifies. |
| Auto-loan-interest deduction, temporary | 2025–2028: Deduct up to $10k of interest on a new, U.S.-assembled, personal-use vehicle; phases out above $100k / $200k AGI. | Do not combine with §179 or bonus depreciation on the same vehicle (those require more than 50% business use). Decide which path fits your situation. |
| Permanent excess-business-loss cap (§461(l)) | Large practice losses now carry forward as NOLs instead of wiping out all other income in the same year. | If you’re expanding and expect big start-up costs, project cash-flow versus tax-benefit timing. |
Lower Tax Brackets Are Now Permanent
The adjusted tax brackets from the 2017 tax law are no longer set to expire in 2026, they are permanent. That means the 10%, 12%, 22%, 24%, 32%, 35% and 37% brackets are here to stay.
Why this matters: A married doctor earning $350,000 will stay in the 24% bracket. Without this change, they would have jumped up to 28%.
Child Tax Credit Increases
The credit goes from $2,000 to $2,200 per child. Up to $1,700 of that is refundable. These numbers will go up with inflation.
It’s worth coordinating with your retirement contribution to ensure you maximize your Child Tax Credit.
Standard Deduction Stays High
The higher standard deduction is now permanent. In 2025, it will be $31,500 for married couples and $15,750 for single filers.
Doctors can still itemize their deductions because of state taxes or mortgage interest.
Temporary Deductions for Overtime and Tips
From 2025 to 2028, you can deduct up to $12,500 of qualified FLSA-required overtime ($25,000 MFJ). Many physicians are FLSA-exempt “learned professionals,” so confirm your role qualifies.
Tip: You can deduct up to $25,000 total (no MFJ doubling). Not available to health-care specified service trades or businesses (including self-employed doctors and their employees). Phase-outs start at $150k / $300k AGI.
New Deduction for Seniors, temporary
If you are age 65 or older and your income is below $150,000 (married) or $75,000 (single), you get a new $6,000 deduction. This is temporary and applies 2025 through 2028.
This is useful for semi-retired physicians with part-time work.
SALT Deduction Cap Temporarily Increased
The cap on state and local tax deductions is $40,000 in 2025, then increases about 1% per year through 2029, and returns to $10,000 in 2030. If your MAGI exceeds $500,000, reduce your cap by 30% of the excess, but not below $10,000.
Doctors in high-tax states may benefit from timing property and state tax payments by December 31, 2025 to use the larger cap. Also consider PTET at the practice level.
More Flexibility With 529 Plans
You can use 529 funds for continuing medical education, credentialing costs, and licensing exams when these are part of a recognized postsecondary credential.
This helps physicians who continue to invest in certifications and required training.
Auto Loan Interest Deduction
From 2025 to 2028, you can deduct up to $10,000 of interest on a car loan for a new, final-assembly-in-the-U.S., personal-use vehicle. The deduction phases out at $200,000 (married) or $100,000 (single).
If you plan to buy a new vehicle, decide between this personal-use deduction or business methods like §179 or bonus depreciation. You cannot use both on the same vehicle.
Permanent Rule on Business Losses
There is now a permanent cap on how much business loss you can deduct in one year. Disallowed losses carry forward as NOLs.
If your practice has a large loss, part of it may need to carry forward to future years instead of being fully deducted all at once.
For Medical Practices and 1099 Doctors
| Topic | Key change | Planning angle |
| 100% bonus depreciation (full expensing) | Back for 2025 and made permanent for new or used qualified property (including QIP) placed in service after Jan. 19, 2025. | Immediate write-off for exam tables, imaging devices, IT gear, lease-hold buildouts, and similar items. |
| Section 179 limits | Cap rises to $2.5m with phase-out starting at $4m; still covers used assets. | Structural items like a new roof or HVAC qualify here (but not for bonus depreciation). |
| QBI 20% deduction | Now permanent, with SSTB phase-outs still applicable. | Tight salary versus distribution strategy remains critical for S-Corp owner-doctors. |
| R&D expensing | Immediate deduction for qualifying development costs (domestic) is restored. | Smaller practices may amend 2022–2024 returns for refunds if eligible. |
| Pass-through SALT workaround (PTET) | States that allow PTET remain green-lit; the deduction is untouched by the personal SALT cap. | Elect early and calendar estimated payments so cash flow is not a surprise. |
| 1099 threshold | Starting with 2026 payments: file Form 1099 only if you pay a contractor $2,000+ (indexed), replacing the $600 rule. | Still track all vendor payments, IRS info-matching risk persists. |
Full Bonus Depreciation Is Back
You can fully deduct the cost of new or used qualified property, including interior non-structural improvements (QIP), placed in service after January 19, 2025.
For example, if you spend $150,000 on exam tables, surgical lights, or an office buildout, you can deduct the entire amount right away. That might reduce your tax bill by $50,000 or more.
QBI Deduction Made Permanent
The 20% deduction for qualified business income (QBI) from S Corps and sole proprietorships is now permanent. Phaseouts for SSTBs still apply.
To stay under the limit, how you structure your salary and distributions as an S Corp remains important.
R&D Expense Deduction Restored
If your practice has invested in internal systems, new technology, or treatment model testing, those costs may count as research and development. You can now deduct domestic R&D immediately.
Smaller practices may be able to amend 2022–2024 returns and claim a refund where eligible.
Section 179 Deduction Limit Increased
The limit for immediately writing off qualifying equipment purchases is now $2.5 million, with a phase-out starting at $4 million. This includes used equipment.
You can combine planning with bonus depreciation and choose whichever method gives the better outcome. Note that structural items like roofs and HVAC are §179, not bonus.
SALT Workarounds for S Corps and Partnerships
If your state allows pass-through entity tax (PTET), your practice can pay state taxes at the business level. This lets you deduct the full amount without being limited by the cap on personal returns.
Make sure to elect this properly and stay ahead of payment deadlines.
Higher 1099 Filing Threshold
Starting with payments in 2026, you only need to issue 1099s to vendors and contractors if you pay them $2,000 or more (indexed in future years). This replaces the old $600 rule.
It may save you time on filings, but you still need to track payments accurately.
Real Estate Planning for Doctors
Full expensing window:
You can deduct the full cost of interior renovations (QIP), such as flooring or lighting, right away instead of spreading the deduction over many years. The 100% bonus applies to improvements with a 15-year life (and other qualified property) placed in service after Jan. 19, 2025. Big-ticket structural items like your roof or HVAC may qualify under Section 179 with the higher limit.
Offsetting clinical income:
Depreciation losses from your building can be used to offset W-2 income or practice income only if you meet the IRS definition of a real estate professional (generally more than 750 hours and more than half your working time in real estate activities). If you don’t qualify, your building-related losses are considered passive and carry forward.
Timing matters:
With interest rate volatility, 2025 could be a sweet spot to buy or renovate and take advantage of tax deductions now before any rate-driven price bounce.
Estate and Gift Tax Exemption Made Permanent
The estate and gift tax exemption is now permanent at $15 million per person or $30 million per couple, set to be adjusted annually for inflation.
That means you can confidently move forward with long-term planning strategies, such as aggressive gifting, FLP or LLC freezes, and practice-succession transfers, without fear of the exemption sunsetting in 2026.
Need help applying the new rules?
This new tax law creates clear opportunities for physicians and medical practice owners. You can save money on taxes, reinvest in your practice, and build a stronger long-term financial plan.
At MedTax, we help doctors apply tax rules to real-life decisions. Whether you’re planning equipment purchases, restructuring your practice, or thinking about retirement, we’re here to help.
Visit our contact page to schedule a call.
We’ll walk through what this means for you and help you make the most of these new rules.
Let’s put the new law to work for your practice.
Until next time!
