How the One Big Beautiful Bill Affects Dental Practices in 2025: What Dentists Need to Know About New Tax Laws

We'd like to thank Jared Ripplinger of CMP, a Utah accounting firm, for this guest blog post. 

The One Big Beautiful Bill (OBBB) became law on July 4, 2025. This 900-page legislation changes tax policy, Medicaid, and education funding across America. Dental practice owners face specific impacts that require immediate attention.

The law creates significant tax savings opportunities for most dental practices. However, it also introduces risks for practices that treat Medicaid patients.

This guide explains exactly how OBBB affects your practice finances and patient base.

Major Tax Benefits of the One Big Beautiful Bill for Dental Practices

1. Permanent 20% Business Income Deduction

The OBBB makes the 20% Qualified Business Income (QBI) deduction permanent for pass-through entities. This includes S-Corps, partnerships, and sole proprietorships. Most dental practices operate under these structures.

The deduction reduces your effective federal tax rate by up to 20%. For high-earning dentists, this drops the top marginal rate from 37% to 29.6% on qualified business income.

Income Limits: Full deduction applies to taxable income below $191,950 for single filers or $383,900 for joint filers (2025 amounts). Above these thresholds, dental practices face phase-outs as specified Service Trades or Businesses, but OBBB expands the range where partial benefits still apply.

Real Example: Dr. Smith operates an S-Corp dental practice generating $300,000 in qualified business income. With the permanent QBI deduction, she saves $60,000 × 24% tax rate = $14,400 annually in federal taxes.

2. Expanded State and Local Tax Deductions

The SALT deduction cap increases from $10,000 to $40,000 through 2029. This particularly benefits dentists in high-tax states.

Income Limits: Full $40,000 deduction applies for income up to $500,000. Above this, the deduction phases down by 30% of excess income.

Real Example: Dr. Johnson practices in New Jersey and pays $35,000 in state and local taxes. Previously, he could only deduct $10,000. Now he deducts the full $35,000, saving an additional $25,000 × 32% tax rate = $8,000 annually.

3. Pass-Through Entity Tax Workarounds Preserved

State PTET regimes remain intact. These allow pass-through entities to pay state taxes at the entity level, bypassing individual SALT limits entirely.

Real Example: Dr. Martinez's California practice pays 9.3% state tax through PTET on $400,000 of income. The $37,200 state tax payment is fully deductible federally, saving $37,200 × 32% = $11,904 in federal taxes while receiving state tax credits.

4. Dramatically Increased Equipment Expensing

Section 179 Limits Double

The immediate expensing limit increases from $1.22 million to $2.5 million annually. The phase-out threshold rises from $3.05 million to $4 million in total equipment purchases.

What Qualifies: Dental chairs, sterilizers, x-ray machines, imaging equipment, computers, software, office furniture, and qualified office improvements.

Real Example: Dr. Chen invests $400,000 in new digital imaging equipment and qualified office renovations. She expenses the entire amount in year one, reducing taxable income by $400,000. At a 32% tax rate, this saves $128,000 in current-year taxes.

5. Research and Development Expensing Returns

The OBBB restores immediate expensing for qualified domestic R&D expenses, eliminating the previous 5-year amortization requirement.

What Qualifies for Dental Practices: Developing new treatment protocols, custom dental devices, clinical software development, or testing new sterilization methods. Must eliminate technical uncertainty through a process of experimentation.

Real Example: Dr. Patel spends $50,000 developing a custom software system for patient treatment planning. Under OBBB, he expenses the full amount immediately rather than amortizing over 5 years, providing $50,000 × 24% = $12,000 in immediate tax savings.

6. Student Loan Relief Affects Recruitment

New Income-Driven Repayment Plan

Starting July 1, 2026, a new IDR plan scales payments from 1% to 10% of adjusted gross income, with a minimum monthly fee of $10. Loans receive forgiveness after 30 years of payments.

Tax-Free Employer Assistance

Beginning January 1, 2026, employer student loan assistance becomes permanently tax-free up to $5,250 annually.

Practice Impact: These changes make it easier to recruit and retain young dentists carrying significant debt loads. Practices can offer competitive benefits packages, including student loan assistance.

Medicaid Changes Threaten Revenue

If you take Medicaid, you’ve likely heard about the changes that are coming as well. Let’s quickly go over them. 

Adult Dental Benefits Become Fully Optional

Starting in 2026. States will gain complete discretion to eliminate or reduce adult dental coverage without federal penalties. Pediatric dental benefits remain federally mandated.

Risk Assessment: Practices serving significant adult Medicaid populations face potential revenue loss. States facing budget pressures may target optional adult dental benefits for cuts.

Real Example: Dr. Rodriguez's practice serves 40% adult Medicaid patients in a state considering benefit cuts. If the state eliminates 75% of adult dental coverage, her practice could lose 30% of patient volume, requiring significant operational adjustments.

Implementation Timeline

Late 2025: States submit benefit redesign plans

Early 2026: Cuts and flexibility provisions take effect

2026-2028: Phased implementation of benefit reductions

Overall OBBB Implementation Timeline

Strategic Winners and Losers of the One Big Beautiful Bill

Practices That Benefit Most

Practices Facing Challenges

Essential Action Steps for 2025 to Maximize the One Big Beautiful Bill Changes

Immediate Tax Planning

Meet with your CPA before year-end to maximize 2025 benefits. Review QBI deduction eligibility and adjust estimated payments. Plan major equipment purchases to utilize expanded Section 179 limits.

Evaluate Practice Structure

Confirm your entity structure optimizes tax benefits. Consider PTET elections in applicable states. Review wage and capital limitations for QBI calculations.

Calculate State Tax Savings

Run projections using the $40,000 SALT cap. Determine your actual savings based on your income level and state tax situation.

Assess Medicaid Exposure

If adult Medicaid patients represent more than 20% of your practice, develop contingency plans. Create financial models for various benefit reduction scenarios.

Plan Equipment Investments

Identify equipment needs for 2025-2029. Time purchases to maximize tax benefits under the expanded Section 179 limits or 100% bonus depreciation.

Build Multi-Year Strategy

Map financial plans through 2029 when SALT benefits expire. Balance current tax savings with long-term practice growth investments.

Maximize Benefits While Managing Risks

The One Big Beautiful Bill creates substantial tax savings opportunities for well-positioned dental practices. The combination of permanent QBI deductions, expanded SALT caps, and increased equipment expensing can generate significant cash flow improvements.

However, practices dependent on adult Medicaid patients face genuine uncertainty. Success requires proactive planning that captures tax benefits while preparing for potential reimbursement challenges.

Expert Guidance Ensures Optimal Results

CMP specializes in helping dental practices optimize complex tax legislation impacts. We understand how laws like OBBB affect practice operations, cash flow, and growth strategies.

Our team helps you maximize available tax savings, optimally structure equipment purchases, and develop contingency plans for regulatory changes.

Contact CMP today to schedule your OBBB consultation and create your comprehensive financial strategy