What OBBBA Means for Dentists

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Sinking Your Teeth Into the One Big Beautiful Bill

It’s important for dentists to understand how the One Big Beautiful Bill Act (OBBBA) affects both their businesses and personal tax situations. While OBBBA introduces few new provisions specific to dental practices, it makes several existing rules permanent and, in some cases, expands them. This article, recently featured in the New York County Dental Society’s Dentists’ Quarterly, highlights the OBBBA changes most relevant to dental practices.

To further support practice owners, we invite you to download our newly released 2025 edition of Dental Practices by the Numbers, a data-driven look at how your practice compares to others in your revenue range.

Depreciation and Expensing

Depreciation is a tax deduction allowed by law for the purchase of an asset that has a useful life of more than one year (capital asset). A computer, a cone beam computed tomography (CBCT) and a dental chair are examples of assets that can be used for more than one year. The law determines the useful life of each asset class. In this case the useful life is five years. As an example of depreciation, a CBCT purchased for $100,000 would be deducted annually at a rate of $20,000 a year over five years.

Under certain situations, capital assets can be expensed in their entirety in the year they are put into service. There are two types of expensing methods for capital assets:

• Section 179: Under OBBBA the limit increased to allow up to $2.5 million in first-year expensing with a limitation on investment of no more than $4 million during the year.
• Bonus Depreciation: OBBBA allows for 100% expensing for property placed in service during each year. The bonus depreciation method was phasing out through 2026 with a limitation of 40% for 2025; OBBBA restored 100% expensing and made this method permanent.

There are some differences related to the two expensing options. The Section 179 deduction cannot be used to reduce practice taxable income below zero. Excess 179 deductions are suspended until the practice has income. Bonus deprecation can create a loss; it has no limit on the amount of investment in capital assets. Both expensing methods are not followed by New York. Deductions are significantly limited on the state level.

Employee Overtime Reporting Compliance

The IRS has announced that penalties will not apply in 2025 for employers who fail to meet the complex reporting requirements for the new overtime deduction for employees. It is likely, however, that employers will have to comply with reporting requirements for 2026. Dentists should consider establishing a reporting process as soon as possible so that it can be in place for 2026.

Pass-Through Entity (PTE) Tax

Under OBBBA, the PTE is preserved for dentists operating as an S Corporation or partnership (after some initial proposals that would have limited it). This includes the New Jersey Business Alternative Income Tax (BAIT) and the New York Pass-Through Entity Tax (PTET). This deduction is a workaround for the state and local tax (SALT) deduction which allows the business entity to deduct the state taxes that were limited on the personal tax return. It was limited to $10,000 (increased to up to $40,000 with limitations under OBBBA) on an individual tax return. The American Dental Association estimates that the permitting of the PTE may save dentists between 1.5% and 5% in federal income taxes.

Qualified Business Income (QBI) Made Permanent

The QBI deduction allows for up to a 20% deduction of dental practice income and other business income on a dentist’s personal tax return. There are taxable income limitations for dentists with phaseouts of the deduction for joint filers beginning at $394,600 and $197,300 for single filers for 2025.

For dentists with taxable income above the phaseout limits, here are a few suggestions to lower your taxable income to take advantage of the QBI:

• Charges to your credit card for business expenses are deductible in the year charged, not the year paid. An example would be purchasing dental supplies and paying for them on a credit card before year end. The credit card payment could be in the following year.
• Purchase equipment and use Section 179 or bonus depreciation as described above.
• Maximize practice retirement plan contributions. Contributions are deductible in the year reported and can be paid up until the filing due date (including extensions) of the tax return.

Employer Student Loan Repayment Program Made Permanent

Deductions for employers, including dentists, helping employees pay for student loans, have been made a permanent provision of the tax law. The repayment is not taxable to the employee, and it is tax deductible for the practice. The maximum amount per employee is $5,250 for 2025 and will be indexed for inflation beginning in 2026. An employee educational assistance plan (EAP) under Section 127 of the tax code is required to be in place at the practice. A specialist at PKF O’Connor Davies can assist with creating a qualified plan.

Offering an employee assistance program (EAP) can be helpful in attracting employees with student loans like associates, hygienists and assistants.  

Looking Ahead

Understanding these provisions can help dentists optimize their tax positions and plan more effectively for the coming years. We encourage you to consult with your tax advisor to understand how these changes specifically apply to your tax situation.

Contact Us

Our PKF O’Connor Davies Dental Practice Accounting and Consulting Team is available to assist with tax, practice management and transition services. If you have any questions, please contact:

David J. Goodman, CPA
Partner
Dental Practice Leader
dgoodman@pkfod.com | 201.712.9800