By Wesley W. Lyon II, CPA, CFP

Following the 2024 election, the Republicans ended up controlling the House of Representatives, the Senate and White House. This avoided a major congressional showdown, instead culminating in President Trump signing the “One Big Beautiful Bill Act” July 4, 2025. I’m not a political person, nor do I name laws — my goal is to report the facts to you as they impact your life. With that in mind, keep reading to learn more about the tax law changes most likely to impact your livelihood.

Many Current Tax Law Provisions Made Permanent

The Tax Cuts and Jobs Act (TCJA) made many changes to tax law back in 2017. However, most of the changes impacting individual taxpayers, such as dentists, were only temporarily enacted since the bill was passed through reconciliation. These temporary provisions were set to expire at the end of 2025, reverting to the former tax law beginning Jan. 1, 2026. The latest law changes make many of these provisions permanent, rather than allowing them to expire.

1. Lower tax rates: The TCJA lowered the tax rates for six of the seven federal income tax brackets. These rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%. These rates are now permanent with no future expiration date.

2. Increased standard deduction and elimination of personal exemptions: The TCJA doubled the standard deduction taxpayers receive in hopes of simplifying returns. You can either choose to itemize your deductions on Schedule A or take the standard deduction. By increasing the standard deduction, the government hoped to reduce the number of taxpayers choosing to itemize their deductions. To offset this change, the law also eliminated personal exemptions, which was a deduction for each taxpayer and dependent. Both these provisions are now permanent in the law, with the standard deduction continuing to increase with inflation each year.

3. Qualified business income (QBI) deduction: The QBI deduction is an additional 20% deduction on the profits of your business, excluding C Corporations. This provision phases out as your income exceeds $394,601 and historically has been eliminated once your income reaches $100,000 more than the base threshold. However, the new law extends the phase-out range another $50,000 to a total of $150,000, allowing even more dentists to take advantage of the QBI moving forward.

4. Estate tax exclusion limits: The TCJA doubled the estate tax exemption limit when passed, which has now climbed close to $15 million per spouse with inflation adjustments. The new law sets the threshold at $15 million per spouse beginning in 2026, rather than reverting to the pre-TCJA limits of $5 million per spouse.

5. Increased section 168(k) bonus depreciation: Bonus depreciation was previously increased to 100% but began declining in 2023 at a rate of 20% per year. The new law brings bonus depreciation back to 100%. Many doctors may not have noticed this change, as equipment can be written off fully under Section 179 of the tax code. However, large sport utility vehicles (SUVs) are deducted under a combination of Section 179 and Section 168(k). This change allows up to 100% of the cost of an SUV with a gross vehicle weight rating (GVWR) of 6,000 lbs. or more to be fully deducted up to your business use percentage in the first year.

Fortunately for most dentists, the new law does not bring sweeping reform. Unfortunately, most dentists still haven’t optimized their tax plan for the current law.

Changes to Tax Law

With the One Big Beautiful Bill weighing in at over 800 pages, I’m not going to cover every change. Instead, I have picked out some of the most impactful changes and sprinkled in a few insights into some of the big ticket items that made their way into the bill.

1. State and local tax (SALT) limits increased: One of the more controversial pieces of the TCJA was the limit on the amount of state and local taxes that can be deducted on a taxpayer’s itemized deductions. The TCJA limited the amount to just $10,000. Since then, there has been a workaround many dentists can take advantage of called the pass-through entity (PTE) election. This allows business owners to pay a portion of their state income taxes through their business and deduct the taxes against the federal taxable income. Originally, this workaround was expected to be eliminated. However, in the final bill, the workaround has stayed. Not only is the PTE election still living, but the SALT limits on individual returns have been raised to $40,000 instead of $10,000 until 2030, with phaseouts beginning when modified adjusted gross income (AGI) exceeds $500,000.

2. Increased exemptions for seniors: Those of you 65 and older will now gain a personal exemption of $6,000 per qualifying spouse, so long as modified AGI does not exceed $150,000 for couples filing a married tax return. This is likely the government’s way of eliminating taxes on social security, but only for those with limited incomes.

3. Expanded uses for 529 accounts: The amount allowable for elementary or secondary education has doubled from $10,000 to $20,000, with books, curriculum, curricular materials, qualifying tutoring, nationally standardized test fees and classes, and dual enrollment expenses now qualifying. Furthermore, qualifying expenses have been expanded to postsecondary credentialling expenses, covering a much wider range of expenses outside of qualifying universities.

4. Domestic research able to be deducted: While the research and development (R&D) tax credit has not been eliminated, under the current law, R&D expenses must be amortized over five years rather than deducted in the same year the R&D tax credit is received. This left many taxpayers in a cash crunch, with more businesses opting out of taking the credit. The new law now allows for immediate expensing of qualifying domestic R&D expenses. Furthermore, this allows taxpayers to amend tax years 2022 through 2024 to claim the credit and related expenses. This is great news for those who qualify. However, you need to be careful. Most dentists will not truly qualify for this tax credit but will be swindled into believing they do by promoters claiming to know more than the certified public accountant community. Prior to filing any R&D credits, make sure you have a team of experts looking out for your best interests, not their own wallets.

5. Elimination of clean energy tax incentives: Under current law, most of the green energy tax incentives will be eliminated. Credits on purchasing electric vehicles will terminate at the end of September 2025, so hurry if you want to take advantage prior to expiration. The residential clean energy credit and energy-efficient home improvement credits are set to expire at year end, while both the energy-efficient commercial building deduction and the new energy-efficient home credit will expire June 30, 2026.

6. Enforcement for COVID-19-related employee retention tax credits (ERTC): Promoters who refuse to comply with auditors will now face penalties of up to $1,000 per each failure to comply. Additionally, the audit period has been extended to six years for the ERTC. Not only does the law address the extended assessment period, but it also applies the extended period to taxpayers who did not properly deduct wages from their business tax return if they received the ERTC for those wages. I expect audits to continue to increase, as fraud is rampant with the ERTC.

7. Notable changes unlikely to impact dentists: There are provisions that will eliminate the tax on tips for many, but these provisions are subject to income requirements and a deduction of $25,000 of qualifying tips. There is a deduction for overtime pay not exceeding $25,000 if married filing jointly, assuming modified AGI does not exceed $300,000. Interest payments on qualifying car purchases with final assembly in the United States will be deductible, of course barring income limits. There is also the creation of “Trump accounts,” which could provide an opportunity for investing even more funds tax-advantaged for your children. However, we want to see the final regulations before we get too excited with this one.

What Can You Do to Maximize Benefits?

Fortunately for most dentists, the new law does not bring sweeping reform. Unfortunately, most dentists still haven’t optimized their tax plan for the current law. The QBI deduction makes tax-planning complex, as the deduction applies only to business profits and excludes owner wages. Often, a dentist needs to increase retirement plan contributions to fall within the proper thresholds. Higher retirement plan contributions generally require higher salaries, working directly in contrast with your goal of maximizing your QBI deduction. Instead of hoping for the best, make sure you are working with a tax-planning professional who knows every tax strategy available to you, ensuring you pay the least amount of tax possible.

W. Lyon II, CPA, CFP, is president and CEO of McGill and Lyon Dental Advisors. For more information on his firm’s comprehensive tax and business planning services for dentists and specialists, contact Danielle Fitzgerald at 877.306.9780, or email consulting@mcgillhillgroup.com. To comment on this article, email impact@agd.org.