WASHINGTON D.C. — Local dentists and small business owners are preparing for major tax changes under the Trump administration’s newly passed “One Big Beautiful Bill Act” (OBBBA), which takes effect in 2026. The legislation incorporates several campaign promises, including permanent tax cuts for individuals and small businesses, expanded estate planning exemptions, and updates to charitable contribution rules.
Key Changes Affecting Practice Owners
High-Income and Estate Planning:
The state and local tax (SALT) deduction cap temporarily increases to $40,000 for incomes under $500,000, up from $10,000.
Lifetime estate and gift tax exemptions rise to $15 million per individual, indexed for inflation.
Individual Tax Updates:
Tax brackets (10%–37%) and the expanded standard deduction are now permanent.
From 2025–2028, the standard deduction increases: $1,000 for singles, $1,500 for heads of household, and $2,000 for married couples filing jointly.
The child tax credit permanently increases to $2,200 per child, indexed for inflation starting in 2026.
High-income taxpayers in the top bracket will see itemized deduction benefits capped at 35%.
Business and Retirement Planning:
Section 199A pass-through deduction of 20% for qualified business income is now permanent, benefiting many dentists and small business owners. Phase-out thresholds apply, so strategic planning remains crucial.
100% bonus depreciation and full research-and-development expense deductions are reinstated through 2029.
Other Notable Provisions:
“Trump accounts” allow parents to deposit $1,000 at birth for children born 2025–2028, with up to $5,000 annual contributions tax-deferred.
Clean energy tax credits for electric vehicles, wind, and solar phase out by 2026.
Seniors can deduct an additional $6,000 from Social Security income, subject to income limits.
Charitable Giving Adjustments:
Starting in 2026, non-itemizers can deduct up to $1,000 (singles) or $2,000 (married couples) for cash donations to public charities.
Itemized deductions now only apply to contributions exceeding 0.5% of AGI.
Cash gifts remain deductible up to 60% of AGI, permanently.
Top-bracket taxpayers face a 35% cap on charitable deduction benefits.
Tax Planning Opportunities for Dentists:
Dentists are advised to consider larger charitable contributions in 2025 before new rules take effect.
Donor-advised funds (DAFs) allow for immediate deductions while deferring distributions.
Qualified charitable distributions (QCDs) from IRAs remain an effective way to reduce taxable income for those 70.5 or older.
OBBBA generally favors middle-class families, retirees, and small business owners while slightly impacting those in the highest tax brackets. Dentists and other small business owners have until the end of the year to optimize their tax planning and potentially maximize deductions under the new law.