Written by Josh Lantz, CRPC®/ Chief Investment Officer, Financial Advisor
OBBB Act Passage and the Tax Implications
The One Big Beautiful Bill Act (OBBB Act) has passed and signed into law. The purpose of this article is to highlight the changes and how this impacts doctors. To that point, we’re going to focus mostly on the tax changes with a quick note about student loan changes at the bottom. We will be sending out more on student loans later.
For the sake of trying to be brief, tax changes can impact married couples that file jointly (MFJ), and single individuals (single). We will use those abbreviations throughout this article.
Federal Tax Brackets
The seven ordinary income brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) created during the passage of the Tax Cuts and Jobs Act of 2017 (TCJA) were made permanent. Previously, these tax rates would have sunset starting in 2026. Meaning tax rates would have increased back to the levels prior to 2017 but now will remain the same due to the new bill.
Itemized Deductions and Mortgage
The current rules will stay the same. Deduction for mortgage interest is still capped at $750,000, but one minor change is that some mortgage insurance premium (MIP) is now allowed to qualify.
Student Loan Employer Benefit
Employers are able to pay up to $5,250 (inflation adjusted) towards employee student loans and exclude it from income. This was made permanent.
SALT Deduction
For starters let’s explain what SALT is. Before 2017 you were able to deduct your state and local taxes. Then along came the SALT deduction limit capping this at $10K on your federal tax return when you itemize. This was especially painful for high earners in high income tax states (NY, OR, CA, MN, NJ, etc.) as it meant a large deduction was significantly reduced. The new bill has modified this deduction. The new maximum SALT deduction has been increased to $40K.
However, the $40K deduction is reduced for those who have a modified adjusted gross income (MAGI) greater than $500K. The deduction is reduced by 30% for every dollar over $500K. The SALT deduction is fully phased out once you hit $600K of MAGI income. The minimum SALT is $10K.
The good news is this SALT increased deduction is effective for 2025. This new SALT deduction is effective through 2029 and then it reverts to the $10K limit for 2030.
This will provide an increased deduction for a lot of doctors who itemize. However, for doctors who earn over the limit, the deduction remains at $10K.
Pass Through Entity Tax (PTET)
When the SALT deduction started in 2017 many states (not all) created a work around for business owners to deduct state and local taxes through their business. This is referred to as the pass-through entity tax or PTET. At one point there was talk of eliminating this workaround, but the final bill did not impact the PTET.
This means doctors who have a business should consider using PTET as another deduction. This only impacts doctors who have a business corporation and not a sole proprietor without a corporation.
Qualified Business Income (QBI) Deduction
The QBI deduction is for those with business income. Doctors with a business can sometimes use this deduction depending on the income levels. However, doctors are considered specialized service, trade, or businesses (SSTBs) which is tax-speak for you’re not allowed to take this deduction if your income limit is greater than the top of the 24% federal tax bracket (currently $394,600 MFJ, and $197,300 single).
However, one change to the new bill is the QBI phaseout is higher. It’s $150K MFJ and $75K single providing some benefit up to a total income of $544,600 MFJ and $272,300 single. Therefore, slightly more doctors will be able to take this deduction who have business income.
Tips and overtime
The bill created a federal income tax deduction on tips (capped at $25k MFJ) effective 2025 through 2028. The modified adjusted gross income (MAGI) income phaseout begins at $300K MFJ and at $150K single. I’ve never met a doctor who got paid in tips, so it likely doesn’t apply.
It also created a Federal income tax deduction on part of overtime pay (capped at $25K MFJ, $12.5K single) with the same phaseout levels as tips. Given most of you are salaried it’s likely you won’t ever receive overtime either.
Above the Line Charity Deduction
The previous tax code allowed those who contribute to charity to benefit, only if they itemized their taxes instead of using the standard deduction. The new bill also allows for charitable deductions if you itemize with some exceptions (see below), but it now has an above the line deduction. Meaning you can contribute to charity even if you don’t itemize and receive a tax benefit. However, the limits are low. This new benefit is $2K joint and $1K single starting in 2026.
If you itemize, which many doctors do, you can only deduct a charitable contribution above 0.5% of your adjusted gross income (AGI). Contributions under that threshold will not be a write off.
Car loan deduction
The bill added a maximum $10K vehicle interest deduction. However, it is phased out with MAGI incomes starting at $200K MFJ and $100K single. The phase out ends at $249K MFJ and $149K single. This deduction is available between 2025 to 2028 for new car purchases only and for personal use only. Final assembly of the vehicles needs to occur in the US to qualify, so this will apply to specific vehicles only.
Higher Standard Deductions
As a reminder, when you file you take the higher of the standard deduction limits or your itemized deductions. A lot of higher income doctors itemize but there’s plenty of doctors who take the standard deduction.
These changes start in 2025. The new standard deduction limit is $31.5K for MFJ (up from $30K) and $15.75K single (up from $15K).
Cap on Itemized Deductions
This bill limits the value of itemized deductions slightly starting in 2026 for those in the highest tax bracket. The itemized deduction will be reduced by 2/37 of the less of 1) the amount of the itemized deductions or 2) the amount of the taxpayer’s taxable income and itemizations than exceeds the start of the 37% federal tax bracket (currently $751,601 MFJ, $626,351 single).
Alternative Minimum Tax (AMT)
The OBBB Act permanently extends the increased individual AMT exemption amounts and reverts the exemption phases thresholds ($1 million MFJ , $500K single). This lowers the exemption slightly starting in 2026. This means more higher earning doctors could be subject to AMT than previously.
Deduction for Those Older than 65
During the campaign trail it was promised to remove taxes on Social Security. This bill did not accomplish that. Instead, they added a deduction for those over age 65 of $6K each from 2025 to 2028. The phaseout begins at MAGI of $150K MFJ and $75K single.
Child Tax Credit
The OBBB Act increased the child tax credit up to $2.2K (was $2K) for each qualifying child starting in 2025. It’s now inflation adjusted and made permanent. This credit is subject to income limits of $400K MFJ and $200K single.
Dependent Care F.S.A.
The dependent care F.S.A. limit at work increased from $5,000 to $7,500 dollars for 2026. This is great news for a lot of doctors who have kids and use a child care provider.
Estate Planning Limits
The federal limits were raised to $15 million for each spouse effective 2026. Therefore, a married couple would only pay federal estate tax if they had an estate greater than $30 million. This is up from the $13.99 million (double for married couple) current exemption limits.
This means most doctors will continue to not have to worry about federal estate taxes at this time. The exception being high earning doctors who make over seven figures annually as they can get to these levels later in their careers.
Also, keep in mind state estate taxes can still apply given those limits are often considerably lower thresholds.
Permanent 100% Accelerated Bonus Depreciation
Accelerated deprecation is when you own a business and you accelerate depreciation on equipment into one year. Under current rules this was allowed up to 40%, but it was being phased out each year. The new law brings this back to 100%.
This act permanently reinstates 100% bonus depreciation for qualified assets in service 1/20/25 or later.
Common uses for practice owners include buying new equipment at work. Taking the depreciation in one year upfront will provide a large tax deduction and thus tax savings. This is common for physicians and dentists that have more equipment in their practices.
Another common practice is doctors with business income will purchase a vehicle for business use (weight of vehicle matters) and accelerate the depreciation into one year to create a large tax savings. This is also popular for rental real estate.
Any year you have large tax savings you want to consider what things you can offset it with. For example, if you reduce your income by accelerating depreciation maybe it’s a good year to pair it with a Roth Conversion.
Trump Accounts
These are the new accounts for your children that will be taxed like an IRA. They start in mid-2026. Contributions are only allowed up to age 18 with a $5K per year contribution limit. You cannot tax withdrawals prior to age 18. The investments must be in a US investment (mutual fund or ETF) costing under 0.10%. There’s no deduction allowed for contributions, but they grow tax deferred.
Employers will be able to contribute up to $2.5K to the Trump account of the employee’s dependents and exclude it from income.
In addition, children born between 1/1/2025 to 12/31/2028 will receive $1K from the federal government.
Previously, non-education tax advantaged accounts for children required the kids to have earned income. This is a way around that.
529 Changes
They removed some of the restrictions for a 529 plan. Previously you could use a 529 for unlimited higher education but restricted to $10K per year per child for elementary or secondary school. That restriction was increased to $20K per year per child on elementary or secondary schools starting in 2026.
Termination of Clean Energy and Solar Tax incentives
Previously under the inflation reduction act there were tax credits (up to $7.5K new, $4K used) available if you met certain MAGI income thresholds ($300K MFJ, $150K Single) that allowed for tax credits for new and used electric vehicles (EVs). This goes away effective 9/30/25.
Many doctors made over these income limits and so they didn’t qualify for the tax credit anyways. However, the loophole for high income earners was that if they leased an EV the dealership would get the tax credit and pass along the savings in the form of lower payments.
Therefore, if you were already planning to purchase an EV and you were under those income thresholds above you should consider accelerating your purchase date to be before 9/30/25. Likewise, if you’re over the income limits but planned to lease an EV you might consider accelerating the date you get the vehicle.
We should note the removal of these tax credits may put downward pressure on the resale value of EVs.
In addition to the removal of EV tax credits, the bill also removed the 30% tax credit for solar and geothermal. The termination date is 12/31/25. Installations must be placed and in service to qualify for that tax credit by year end. If you have a pending solar or geothermal project, make sure to meet these deadlines. If you were already considering solar or geothermal, you might want to talk with the vendors about whether they can complete this project prior to the end of 2025.
Student Loan and PSLF Changes
We will be sending out future communications about student loan changes in the coming weeks to share the various details. The important thing to know is future borrowers, meaning the future doctors of the world in medical and dental school, will be impacted the most. However, existing borrowers like doctors who already have student loans will have less changes.
PSLF will stick around and is unlimited for existing borrowers. PSLF is still tax-free. What will change is the income driven repayment plan options. SAVE, PAYE, and ICR will be phased out over time, and you’ll need to transition to the new/old IBR (or the new RAP in 2026). IBR will remain an option for existing borrowers. The OBBB Act created a new income driven plan called Repayment Assistance Plan (RAP) starting in 2026. Some of the timelines for the changes are still uncertain so we’re waiting on the Department of Education to make those announcements.
If you’re in SAVE, the interest will start accruing on August 1st, 2025. The Department of Education is encouraging (see article) those on SAVE to transition to another income driven plan online. They are encouraging a transition to new/old IBR. Given many borrowers who were in SAVE were being prevented from making a switch over the last year, this is at least providing some clarity on which direction they can take on their path towards PSLF.
We will be sending out more information on student loans later. In the short run, if you have questions, please reach out to your advisor for assistance.
Wrapping up
As you can see there are a lot of changes contained within the OBBB Act. We didn’t go through every change but provided a summary of the ones we felt impact doctors the most. We will incorporate these changes into your financial planning over the next year. In your next meeting let’s be sure to discuss how these changes might impact your specific situation.
Sources
https://www.thetaxadviser.com/news/2025/jun/details-of-tax-changes-in-senate-reconciliation-bill/
https://www.congress.gov/bill/119th-congress/house-bill/1/text
https://www.journalofaccountancy.com/news/2025/jun/tax-changes-in-senate-budget-reconciliation-bill/
Josh Lantz, CRPC®/ Chief Investment Officer, Financial Advisor With over a decade of financial planning experience, Josh has worked on more than 500 doctors’ financial plans. “It’s very hard to find a doctor’s situation I haven’t seen before,” says Josh. This is only a snapshot of the expertise Josh brings to MD Financial. He can be reached at Josh@mdfinancialadvisors.com.
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