The new OBBBA tax act and major implications for dentists

It seems like every new administration likes to take a go at the tax code, depending on the promises they ran on during their campaign. Trump’s administration passed OBBBA, known as the “One Big Beautiful Bill Act," this summer, and it covers several of his agenda items from his campaign.

We can agree that beauty lies in the eyes of the beholder, but the bill is objectively big, and for the last couple of months I’ve been digesting a lot of the changes via webinars and white papers to learn how they apply to the dentists and families I work with. In full transparency, as a small business owner, they very much apply to my own situation, and like everyone reading, I plan my finances in a way to pay the least amount of taxes legally possibly and not a dollar more.  

The biggest changes from OBBBA for practice owners

High-income and estate planning provisions¹

• State and local tax (SALT) cap temporarily increased to $40,000 for incomes under $500,000 through 2029. This means that if your income is under $500,000 (married filing jointly phaseout), you are able to itemize up to $40,000 of your state and local taxes. Prior to OBBBA, this was capped at $10,000.
• Lifetime estate and gift tax exemption increases to $15 million starting in 2026 (indexed for inflation). This means that every individual can give away (via gift or inheritance) up to $15 million without federal estate tax applied.

Individual tax changes

• Tax brackets (10%–37%) and the expanded standard deduction are now permanent (formerly changed via the Tax Cuts and Jobs Act).
• Temporary boost to the standard deduction from 2025 through 2028
• $1,000 increase for single filers
• $1,500 increase for the head of household
• $2,000 increase for married couples filing jointly (MFJ)
• Child tax credit permanently is increased to $2,200 per child and indexed for inflation starting in 2026.
• Overall, this means that the top marginal tax bracket doesn’t revert to the higher 39.6%, which means taxes will stay consistent since the Tax Cuts and Job Act. This means more money in your pocket and less money toward taxes.
• Those in the 37% marginal tax bracket will have their itemized deductions value capped at 35%. 

Business and retirement planning

• Section 199A pass-through deduction of 20% for qualified business income will be made permanent. This is a significant deduction for most dentists and other small business owners. As such, taking this deduction can be a significant reduction in tax liability for dentists. Remember, you are still subject to income phaseout amounts (a single filer phaseout starts at $197,300 and ends at $272,300). This phase-in range was expanded under OBBBA. That means strategies to reduce your taxable income are key to qualify for at least a partial QBI deduction.
• 100% bonus depreciation and full R&D expenses will be reinstated through 2029 

Other notable provisions

• Create "Trump accounts." Make a $1,000 deposit at birth for children born 2025-2028. Parents may contribute up to $5,000 per year tax deferred. We are still waiting on more guidance on these accounts and their implementation.
• Clean energy tax credits for EVs, wind, and solar will be phased out by 2026.
• Social Security income is not fully tax-exempt, but seniors may deduct an additional $6,000 (phased out by income).²
• Medicaid, SNAP, and other safety-net programs face reduced funding and tighter work requirements (nontax impact). 

Charitable donations: What you need to know about the new tax law³

OBBBA and the new tax laws go into effect in 2026 and introduce important changes to how charitable contributions are deducted. If you give regularly to charitable organizations, these updates could directly affect your planning and tax strategy. 

Key changes for individuals effective 2026 

1. Above-the-line deduction for nonitemizers: Beginning in 2026, individuals who do not itemize their deductions can still deduct up to $1,000 for single filers, and up to $2,000 for married couples filing jointly. Note: This applies only to cash donations made directly to public charities. Contributions to donor-advised funds (DAFs) and supporting organizations are excluded.

2. 0.5% AGI floor for itemized deductions: For those who itemize, only the portion of charitable contributions that exceeds 0.5% of adjusted gross income (AGI) will be deductible. Example: If your AGI is $500,000, the first $2,500 of charitable giving would not be deductible.

3. Permanent 60% AGI limit for cash gifts: The ability to deduct cash contributions to public charities up to 60% of AGI is now permanent, offering greater long-term flexibility in giving strategies.

4. 35% deduction cap for high-income taxpayers: For individuals in the top tax bracket, the maximum tax benefit from charitable deductions will be capped at 35%, slightly lower than the current 37%. 

What dentists can do before 2026 

Make larger gifts in 2025: The new limits do not apply until January 1, 2026. This makes 2025 an ideal year to consider larger or "bunched" contributions to take full advantage of current deduction rules.

Use DAFs: DAFs allow you to make a contribution and receive a deduction this year, while distributing funds to charities in future years, offering flexibility and efficiency. 

Consider qualified charitable distributions (QCDs): If you’re age 70.5 or older, giving directly from your IRA can reduce your taxable income without affecting your AGI. QCDs are not subject to the new 0.5% floor. QCDs are also a great tool to satisfy RMDs, reduce future RMDs, and keep your AGI effectively lower.

Here’s a quick example of a dentist/MFJ couple: 

• AGI of $400,000
• California state income tax $18,000
• State real estate tax $22,000
• State and local/SALT deduction new limit $40,000
• Home mortgage interest $18,000
• Total deductions $58,000
• Taxable income $342,000

This would mean they’re below the MFJ QBI phase-in range and qualify for the 20% deduction, which in this simplified case is $68,400. In their 24% marginal tax bracket, the federal tax savings alone are around $16,000.

As you can see, qualifying for the QBI can be a significant tax savings move that requires careful analysis and tax planning. 

Summary and planning outlook

Overall, this bill keeps taxes lower as originally instituted by the Tax Cuts and Jobs Act of 2017 during Trump’s first presidency. But since something always has to give, there are provisions in the bill that negatively impact those in the highest marginal tax bracket.

The bill favors middle-class families, retirees, and small business owners. It’s important to understand which of these provisions apply to you depending on your situation/income, W-2 versus dental practice owner, charitably inclined or not, still accumulating wealth, or close to retirement. 

You still have a window until December 31 to do tax planning and implement any strategies to lower your taxable income, potentially qualify for the QBI deduction, and overall reduce your tax burden. And as always, remember to tip your waiter and not the IRS.

Author's note: The opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. You should consult your tax, legal, and accounting advisors before engaging in any transaction. Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC.

Editor's note: This article appeared in the November/December 2025 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.

References

1. Mattlin B. New law restricts charitable deductions next year. Financial Advisor. August 8, 2025. https://www.fa-mag.com/news/new-law-restricts-charitable-deductions-next-year-83619.html

2. One Big Beautiful Bill Act: tax deductions for working Americans and seniors. Internal Revenue Service. July 14, 2025. https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

3. Nevius AM. Tax provisions in the One Big Beautiful Bill Act. Journal of Accountancy. June 29, 2025. https://www.journalofaccountancy.com/news/2025/jun/tax-changes-in-senate-budget-reconciliation-bill/