How the One Big Beautiful Bill Impacts Your Private Practice Taxes

What is the One Big Beautiful Bill Act?

The OBBB was signed into law on July 4, 2025. The bill was signed into law on July 4, 2025 and is a federal statute focusing on tax and spending policies.

Importantly for health care providers, the OBBB includes adjustments to Medicare and Medicaid, and also modifies the Affordable Care Act (ACA).

How the OBBB affects private practice

The OBBB’s biggest impact on health and wellness practitioners will likely come from changes to healthcare programs. Some patients who use Medicare, Medicaid, or ACA assistance could see adjustments to their coverage.

On the other hand, the OBBB introduces changes to tax law that could allow your practice to benefit from higher limits on credits and deductions.

This is a summary of all the changes relevant to private practice.

Medical coverage for clients

• Medicaid eligibility changes. Work requirements, additional state-level checks, and funding adjustments mean eligibility will shift for some beneficiaries.
• Medicare enrollment updates. Certain rules for lawfully present immigrants have been modified.
• ACA marketplace assistance. Financial assistance for some plans will phase out at the end of 2025.

Changes to taxes

• Indefinite extension of current personal income and corporate tax rates. The rates, introduced provisionally in 2017 with the TCJA, are now permanent.
• “No tax” on tips and overtime. Up to certain limits, tips and overtime pay may be deducted from taxes.
• Small increase to the standard deduction. While minor, this change may be cause to reconsider itemizing your deductions.
• Increased cap on state and local tax (SALT) deductions. Individuals and businesses may now deduct a greater amount of state and local tax from their federal taxes.
• Pass-through entity tax (PTET) workarounds protected. Methods businesses may use to claim deductions greater than the SALT limits are now protected from federal interference, and explicitly allowed in over 30 states.
• Changes to the qualified business income (QBI) deduction. Higher-income businesses now have a longer phase-in period for QBI, resulting in more savings. Smaller businesses benefit from a minimum QBI deduction.
• Section 179 limits increased. Section 179 allows businesses to deduct the full cost of major purchases from their current-year taxes rather than amortizing them.
• Immediate expensing and bonus depreciation. Businesses may now immediately write off 100% of qualifying current-year purchases rather than amortizing them.
• Employer Child Care Credit increases. Employers who provide or subsidize childcare for employees benefit from increased tax credits.
• Paid Family and Medical Leave Credit increases. Employers who provide employees with paid leave now benefit from increased tax credits.
• Health savings accounts (HSA) expansion. The contribution limit to HSAs has doubled, and the number of qualified expenses has increased.

How OBBB tax changes affect private practice

The OBBB includes a range of tax law updates that affect small business owners. For private practice owners, these changes create new opportunities to adjust your tax planning and potentially reduce your tax bill.

The TCJA tax rates are now permanent

The income tax and corporate tax rates introduced in 2017 by the TCJA are now permanent. Accountants and tax planners were warning of a potential tax hike when the rates expired in 2025, but now that they’re permanently in place, you can plan your tax withholdings and make financial projections with confidence.

💡 The Tax Cuts and Jobs Act (TCJA) was a major U.S. tax reform passed in 2017. It lowered personal and corporate tax rates and changed how many deductions work. You can read more on the IRS TCJA page.

“No tax” on tips and overtime (up to a point)

Up to $25,000 in tips and $12,500 in overtime pay ($25,000 for joint filers) are now 100% tax deductible for qualified filers. In effect, this means that individuals do not pay income tax on those earnings.

‍While you may not accept tips at your private practice, the overtime deduction could affect your staff scheduling. The overtime deduction is meant to encourage workers to put in extra hours and benefit from tax-free income as a result.

If you have employees, this may be a good time to consult with them about extra overtime — particularly if you would like to expand your operating hours or take on additional clients. You could avoid the cost of hiring new staff by giving your existing staff the opportunity to work more hours.

The standard deduction has increased

The OBBB raises the individual standard deduction from $15,000 to $15,750, indexed for inflation. If you already take the standard deduction, that means more tax savings. If, on the other hand, you itemize your deductions, this is a good time to crunch the numbers and make sure you’re enjoying the largest write-off possible.

The state and local tax (SALT) deduction cap has increased

The SALT deduction allows you to deduct the cost of state-level taxes on your federal tax filing. It’s an above-the-line deduction.

Before 2017, there was no cap. The TCJA introduced a $10,000 cap. Now the OBBB is raising the cap to $40,000, indexed at 1% per year.

If you live in a state with high taxes, that could mean a higher write-off the next time you file taxes. Make sure you’re accurately tracking all of the state and local tax you pay, so you can report them accurately.

‍One caveat: the increased cap only lasts until 2029. After 2029, it will lower to $10,000.

💡 SALT stands for State and Local Taxes. This deduction lets you subtract what you’ve already paid in state and local income or property taxes from your federal tax bill, so you’re not taxed twice on the same income. Learn more from the IRS SALT overview.

The pass-through entity tax (PTET) workaround is now protected

Many states allow businesses to take advantage of the PTET workaround. The workaround allows a pass-through entity to pay state taxes directly, and then deduct the expense on its federal income tax return. By doing this, a business can deduct an amount from its federal taxes higher than the SALT cap.

The PTET workaround is managed individually by states. In total, more than 30 states allow it.

Only qualifying businesses may take advantage of PTET. Generally, that includes S corporations, partnerships, and LLCs with more than one member. But the exact requirements vary by state.

‍Prior to the OBBB, there was potential for federal tax authorities to challenge individual states on the PTET, meaning the future of the workaround was uncertain. But the PTET includes provisions explicitly protecting PTET from federal interference.

If you typically take advantage of the PTET, or if you’re considering it for the first time, you can now confidently include it in your tax strategy.

💡 The Pass-Through Entity Tax (PTET) workaround helps certain small businesses (like S-corps, LLCs, and partnerships) pay state taxes directly through the business instead of individually. This lets them claim bigger federal deductions than the SALT cap allows.

The QBI deduction has changed

The QBI deduction allows qualifying businesses to deduct 20% of their income from their taxes.

The OBBB does not change the 20% amount, which businesses qualify, or the basic calculation method.

However, it makes the QBI permanent and increases the phase-in period for high-income businesses from $50,000 to $75,000. That means the amount you can deduct decreases more gradually if your business is in a higher income bracket.

Lower-income businesses benefit from a minimum deduction. If your practice has at least $1,000 in qualifying income, your deduction is the greater amount of $400 or 20% of that income.

For more, read Heard’s guide to QBI for private practices.

💡 The Qualified Business Income (QBI) deduction lets certain self-employed people and small businesses deduct up to 20% of their income from their federal taxes. It’s designed to reduce taxes for “pass-through” businesses, ones where income flows directly to the owner’s personal return. See the IRS’ qualified business income deduction page for more.

The Section 179 write-off cap is now higher

Businesses can elect to write off expenses under Section 179, avoiding the need to depreciate new business property and writing off the entire expense in the current year.

The limit was $1.25 million, but with the OBBB, it has now doubled to $2.5 million. The phaseout limit has increased to $4 million.

💡 Section 179 of the tax code lets small businesses deduct the full purchase price of qualifying equipment or software during the same year it’s bought – instead of spreading it out over time. In plain terms: if you buy new clinic equipment, you can often write off the entire cost this year. Learn more from the IRS.

Limits on immediate expensing and bonus depreciation have increased

Similar to Section 179, bonus depreciation allows your business to write off the cost of an asset in the current year rather than depreciating it.

The bonus depreciation amount was scheduled to phase out, and was lowered to 40% of qualifying assets. With the OBBB, it returns to 100 per cent.

The Employer Child Care Credit has gone up

The Employer Child Care Credit allows businesses that provide or subsidize childcare for their employees to enjoy tax savings.

‍Prior to the OBBB, the credit was set at 25%, up to a limit of $150,000.

The OBBB gave this credit a boost. Now businesses can receive a 40% credit on up to $500,000 in childcare costs. Certain qualifying small businesses receive a 50% credit up to $600,000.

‍If you’re concerned about employee retention or hoping to attract new employees, now is a good time to consider offering subsidized childcare. The new credit increases can help offset the cost.

The Paid Family and Medical Leave Credit has increased

The Paid Family and Medical Leave has been permanently extended. The OBBB also expands and improves this credit, with broader eligibility criteria and higher percentages for qualifying employers.

‍Like subsidized childcare, paid leave can help to retain and attract employees. Changes to this credit may be an incentive for expanding employee benefits.

The threshold on Form 1099 determines who needs to file the form. It has increased for three common 1099s:

Form 1099 thresholds increase

• Form 1099-NEC: Previously, a business that paid a contractor $600 or more over the course of the year was required to submit a Form 1099-NEC. The threshold has increased to $2,000.
• Form 1099-MISC: As with Form 1099-NEC, the 1099-MISC threshold has increased to $2,000.
• Form 1099-K: Payment processors are required to send a Form 1099-K to customers. Like other 1099s, this one has a threshold. Prior to the 2025 tax year, the threshold was $600, with no transaction minimum. With the OBBB, the threshold is set at $20,000 and a minimum of 200 transactions.

If you commonly pay contractors (Form 1099-NEC) or other individuals or businesses (Form 1099-MISC), you may now find you need to submit fewer Form 1099s because of the increased thresholds.

‍If you accept online payments through platforms like Venmo or Paypal, you may no longer receive a Form 1099-K each year from those payment processors. Ultimately, this means less paperwork to keep track of.

💡 A 1099 form is how you report payments to contractors or freelancers. The new rule raises the threshold which could mean fewer forms to file.

HSA contribution limits have doubled

An HSA lets you set aside money to cover health expenses while reducing your tax burden. If you’re an employer, you may provide contributions to employees’ HSAs as part of your benefits package.

Starting in 2026, the maximum annual HSA contribution increases from $4,150 (individuals) and $8,300 (family) to $8,450 (individuals) and $16,850 (family).

HSAs have been expanded to include more qualifying expenses — namely, Direct Primary Care, telehealth, and gym memberships.

In 2026, consider increasing contributions to your HSA to increase your tax savings, and review your benefits package for employees.

💡 An HSA is a special savings account for people with high-deductible health plans. You can set aside money tax-free for future medical expenses, and the new rules under the OBBB mean higher contribution limits and more ways to use it. Here’s the IRS page for more on HSAs.

When does the OBBB come into effect?

Different provisions of the OBBB come into effect at different times:

2025

• TCJA tax rates permanent
• Tax deductions on tips and overtime
• SALT cap increase
• PTET workaround protected
• Increased standard deduction
• Childcare tax credit increase
• Paid leave tax credit increase
• QBI changes
• Section 179 and bonus depreciation changes

2026

• Form 1099-NEC, 1099-MISC, and 1099-K reporting thresholds increase
• HSA contribution limits increase

2027

• Medicaid work requirements

2028

• Adjustments to ACA health marketplace eligibility

The OBBB timeline for private practices

Once you have an idea of the changes you expect from the OBBB, it’s time to plan how your practice will adapt.

This timeline should serve as a rough guide to help you implement changes.

Q4 of 2025

Track and plan new deductions

Bonus depreciation, increased HSA contributions, a raised cap on SALT deductions, and the PTET workaround may all serve to lower your practice’s tax burden.

Review the relevant expenses now, and make sure you’re tracking them accurately. Then do some research — or talk to an accountant — about any additional tax forms you may need to include when you file.

Revisit above-the-line deductions

The increase to the standard deduction may make it a more attractive option if you typically itemize your write-offs. Conversely, the increased SALT deduction cap may mean it’s time to switch from the standard deduction to itemized deductions.

‍Calculate your itemized deductions, taking the OBBB changes into account, and plan which method you will use when you file.

Keep an eye on Form 1099 thresholds

If you were planning to file Form 1099-NEC or Form 1099-MISC for the 2026 tax year, review the numbers. The amount you have paid (or will pay) contractors or other individuals may fall below the new reporting thresholds. That means less paperwork when tax season arrives.

Plan to implement employee benefits

The increased Employer Child Care Credit and Paid Family and Medical Leave credits may now make these benefits affordable for your business. And contributions to employee HSAs can reduce your tax burden. It’s time to start planning if or how you will implement them in 2026.

Keep in mind that you can implement them immediately and enjoy some tax savings, but it may be best to wait until you have prepared your next annual budget before incurring the expenses.

2026

Make your first post-OBBB tax filing

Your tax filing for 2025 will be impacted by the changes introduced by the OBBB that have already come into effect. Work with an accountant to make sure you’re maximizing your tax savings and complying with new rules.

Prepare for healthcare program changes

Adjustments to coverage may begin affecting some clients this year, with additional changes scheduled for 2027. Planning ahead can help you support clients as their coverage evolves and adapt your practice to any shifts in how care is paid for.

Implement new employee benefits

If you planned to add childcare, paid leave, or HSA contributions to your benefits packages for employees, this is the time to put those changes into effect. You should see the impact on your tax bill after the end of the year, when you file your 2026 taxes.

Review quarterly payments

If changes in client coverage, tax credits, or deductions are likely to affect your practice’s taxable income, take the time to make projections. If you anticipate a lower tax bill, you may benefit from making lower quarterly payments — but keep the safe harbor rule in mind.

Hear more from Heard 💚

Here are a few more resources on taxes for private practice you can check out:

• New tax credits and deductions for private practice owners
• Complete list of tax deductions to help prep your practice for tax season

And if you’re curious about what Heard’s up to, you can check them out here.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post.