8 Must-Know OBBB Tax Changes for Physicians

8 Must-Know OBBB Tax Changes for Physicians The One Big Beautiful Bill (OBBB) Act, signed into law by President Trump on July 4th, 2025, is poised to reshape the U.S. tax landscape, bringing notable changes for individuals and businesses.

While some provisions — such as changes to Medicare and Medicaid — may affect the practice side of medicine, this summary highlights the key elements of the bill from a personal financial perspective that the advisors at FDI feel every physician should keep in mind as the law takes effect.

Current Law (2025) Federal Income Tax Brackets The current top marginal rate is 37%, but the brackets were scheduled to revert to pre-Tax Cuts and Jobs Act (TCJA) levels in 2026 (top rate 39.6%).

Additional Standard Deduction (Age 65+) Taxpayers over age 65 receive an additional standard deduction based on status: Individual: $2,000 Married Filing Jointly: $3,200

State and Local Tax (SALT) Deduction Cap There is currently a $10,000 annual cap on SALT deductions for itemized filers.

Signed Bill (7/4/25)

Potential Impact

OBBB makes the existing TCJA tax bracket structure (including 37% top rate) permanent.

Physicians with higher income avoid the increased 39.6% bracket.

OBBB keeps the existing deduction and adds an additional $6,000 deduction for taxpayers aged 65+ that is reduced by 6% of your AGI* over:

May not apply to higher-income households as the additional deduction amount phases out at:

Individual: $75,000 Married Filing Jointly: $150,000

Individuals: $175,000 Married Filing Jointly: $350,000

The deduction cap has raised and new phase-out limits apply, but the deduction can’t be reduced below the original $10,000 amount by phase-out.

With the SALT deduction cap increased, physicians in high-tax states who previously took the standard deduction may find it more advantageous to itemize going forward.

2025: $40,000 cap, reduced by 30% of MAGI** > $500,000 2026: $40,400 cap, reduced by 30% of MAGI** > $505,000 2027-2029: Both amounts increase by 1% annually

Expansion of 529 Account Capabilities In addition to tuition and related expenses for secondary and graduate schooling, 529 withdrawals can be used on K-12 tuition, up to $10,000 per child annually. However, 529 funds cannot be used for other K–12 expenses such as books or supplies.

Effective 7/4/2025: The OBBB expands 529 plan usage to include qualified non-tuition expenses for both K–12 and college, such as books, tutoring, online learning, or post-secondary credentialing.

This will significantly increase the flexibility and advantages of utilizing 529 accounts.

Effective in 2026: The annual limit for K-12 tuition withdrawals is increased to $20,000 per child. * AGI - Adjusted Gross Income ** MAGI - Modified Adjusted Gross Income

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8 Must-Know OBBB Tax Changes for Physicians Current Law (2025) Creation of “Trump Accounts” Newly established under the OBBB Act.

The Qualified Business Income Deduction This was scheduled to end on December 31st, 2025.

It allows up to a 20% deduction for qualified business income from pass-throughs (e.g., sole proprietors, S-corps, and partnerships) that phases out at specific higher income levels.

Bonus Depreciation Deductions For Your Vehicle Vehicles used for business by I.C.s could take advantage of bonus depreciation deductions capped at 40% for the first year, that phases out over time in subsequent years.

Federal Student Loan Cap Changes Parent PLUS, Grad PLUS, and other federal student loans allow borrowing up to the total cost of attendance with no lifetime cap.

(Continued)

Signed Bill (7/4/25)

Potential Impact

Establishes a new type of IRA for American children born between 2025 and 2028, seeded by the federal government with $1,000 that cannot be distributed until Age 18.

We anticipate these to be attractive and popular, but there will also be limits to how the funds can be used as well as many details still needing clarification from the treasury department.

OBBB makes the 20% QBI deduction permanent, extends the amount of income subject to the phase-out rules, and raises the threshold of eligible income in 2026 by an additional:

The QBI deduction becomes a permanent fixture under the new law, which is especially beneficial for independent contractors who were facing its scheduled expiration at the end of 2025. With the expanded income limits, a greater number of taxpayers will now qualify for the deduction.

Individuals: $25,000 Married Filing jointly: $50,000

Reinstates the 100% bonus for qualified vehicles over 6,000 pounds, acquired after 1/19/2025.

To qualify, over 50% of the vehicle’s usage must be for business purposes. Can be new or used.

Creates significant tax-saving opportunities for I.C. physicians making equipment/vehicle purchases.

New annual and lifetime caps will apply, with an effective date of July 1st, 2026:

There will likely be a greater reliance on private loans for educational costs in the future and a renewed pressure on addressing tuition pricing and expansion of available need-based financial aid packages to enrolling students.

Grad PLUS: $20,000 annual, $100,000 lifetime Parent PLUS: $20,000 annual, $65,000 lifetime (per dependent) Professional Students: $50,000 annual, $200,000 lifetime All Federal Student Loans: $257,500 lifetime cap applies, excludes Parent PLUS.

This summary is for informational purposes only and should not be considered personal tax advice. Please consult a qualified tax advisor before making any financial decisions.

Want to see how Financial Designs, Inc. can help you meet your goals? Schedule a your 1-on-1 consultation with an FDI advisor. www.financialdesignsinc.com (888) 898-3627 connect@financialdesignsinc.com

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The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. Tax and legal advice offered through Financial Designs Tax Services, LLC and Financial Designs Legal Services, LLC. Members of Financial Designs, Inc. who are also Cambridge representatives do not offer tax or legal services. Please see your tax or legal advisor. Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.

Financial Designs, Inc., Financial Designs Tax Services, LLC and Financial Designs Legal Services, LLC are not subsidiaries or affiliates of Cambridge Investment Research, Inc. Cambridge Investment Research, Inc. does not offer tax or legal advice.

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