What the Latest Federal Tax Bill Means for Dental Practices and Their Owners

After months of debate, Congress has passed an enormous budget reconciliation bill with a wide range of tax changes affecting small businesses and individual taxpayers alike. While the headlines focus on sweeping economic measures, many of the provisions could directly shape how dental practices operate, invest, and plan ahead.

If you own or manage a dental practice, here are the highlights you should know and steps you might consider in response.

New Incentives for Equipment and Technology Investments

One of the most significant changes is the return of full expensing for major purchases. If you’re planning to upgrade your equipment, invest in advanced imaging technology, or modernize your administrative systems, the revised Section 179 rules will allow you to deduct up to $2.5 million of qualifying purchases in the year you buy them.

Previously, deductions had to be spread out over time, but the accelerated write-off can now provide immediate tax relief and help improve cash flow. Keep in mind that if your total qualifying purchases exceed $4 million, the deduction begins to phase out.

More Room to Deduct Interest Expenses

If you’ve taken out loans to renovate your office, open a second location, or acquire another practice, the rules for deducting interest payments just became more favorable. The new law allows interest deductions to be calculated using EBITDA, earnings before interest, taxes, depreciation, and amortization, rather than the narrower EBIT measure.

This adjustment increases the amount you can deduct each year, which can be especially helpful for practices carrying debt from growth or equipment financing.

Expanded Research and Development (R&D) Deductions

While many dental practices don’t think of themselves as research businesses, certain investments – like developing proprietary patient education materials, implementing new digital workflows, or testing innovative service models – can qualify for R&D deductions. Under the bill, smaller businesses with less than $31 million in gross receipts (which is most dental practices) can immediately deduct eligible R&D costs rather than amortizing them over time. This change rewards innovation and may help offset the expense of improving patient care.

QSBS Exclusion Returns for C-Corporations

If your practice is organized as a C-corporation and you’re considering selling your business in the next few years, take note of the revived Qualified Small Business Stock (QSBS) exclusions. Owners who meet certain requirements, including holding their shares for at least five years, may be able to exclude up to 100% of gains from federal tax when they sell. This could translate into substantial tax savings at the time of exit or succession planning.

SALT Deduction Cap Temporarily Increased

The bill raises the cap on state and local tax (SALT) deductions to $40,000, with a gradual phaseout beginning at $500,000 of income. However, this relief is temporary; the cap is scheduled to revert to $10,000 in 2030. For dental practice owners, especially those operating pass-through entities, this creates a narrow planning window. It’s a good time to reevaluate whether the entity-level SALT workaround remains effective and how to best optimize deductions while the higher cap is in place. Strategic tax planning now can help minimize liabilities before the cap drops again.

Personal Tax Changes That Matter to Practice Owners

While these business provisions can influence practice finances, there are also personal tax updates to be aware of:

  • Expanded Child Tax Credit: Temporarily increased to up to $2,500 per qualifying child, with more flexibility in how it phases in.
  • New Deductions for Common Expenses:
    • Up to $6,000 in additional standard deduction for taxpayers over 65.
    • Interest deductions on loans for U.S.-assembled electric vehicles, up to $10,000.
    • Above-the-line deductions for overtime and tip income (though not likely as relevant for dental offices).
  • No Federal Tax on Tips: While this mostly affects hospitality workers, employees with tip income will no longer pay federal tax on it.
  • Individual Tax Rates Extended: The lower tax brackets set in 2017 are extended through 2028, helping many owners save on personal income tax.

How Your Practice Can Prepare

Navigating these changes doesn’t have to be overwhelming. Here are a few things you should consider:

  • Evaluate planned purchases of equipment and technology to optimize deductions.
  • Review financing structures to maximize interest expense benefits.
  • Assess your entity type and QSBS eligibility if a sale or transition is on the horizon.
  • Update your personal tax plan to leverage available deductions and credits.

Even though this legislation is complex, and this just scratches the surface of what it contains, it creates some opportunities to strengthen your practice’s financial position while supporting your personal goals. If you’d like to discuss how these updates apply to your specific situation, we’re here to help.

FTC Non-Compete Rule Halted: Key Insights for Dental Practices

Recently, a significant development emerged for dental practice owners and administrators: the Federal Trade Commission (FTC)’s proposed ban on non-compete agreements has been temporarily paused. This delay, issued by U.S. District Court Judge Ada Brown in the Northern District of Texas, postpones the rule that was initially set to take effect soon. (You can read the post we wrote about this rule when it was announced here.)

The FTC’s Rationale

The FTC’s proposed rule aims to promote labor mobility and enhance wage growth by eliminating non-compete clauses that restrict employees from changing jobs. The FTC argues that these agreements inhibit innovation and economic growth, impacting nearly 30 million Americans. The proposal received broad public support, with many advocating for a national standard to supersede restrictive state laws.

Business Community Concerns

On the other side of the coin, the rule encountered significant opposition from the business community. Organizations like the U.S. Chamber of Commerce contend that the FTC has overreached its authority, arguing that non-compete agreements are vital for protecting proprietary information and maintaining business stability. These agreements are seen as crucial for fostering investment in employee training and protecting business interests.

Potential Disruptions

Legal challenges emphasize the potential economic and operational disruptions the rule could cause. Critics highlight that implementing the rule could lead to substantial upheaval across industries, suggesting that the FTC’s approach is too aggressive. They advocate for a balanced solution that considers both worker mobility and the contractual protections businesses rely on.

Implications for Dental Practices

For dental practices, the impact of this rule is particularly pertinent. Non-compete agreements are frequently used to protect sensitive business information and keep employees from approaching former patients when they leave a practice or open their own. Eliminating these agreements could force dental practices to rethink their hiring and retention strategies.

Looking Ahead

The Supreme Court’s Loper Bright Enterprises v. Raimondo finding in June could also impact the legality of this FTC rule since it shifted how courts interpret the statutory authority of federal agencies. The outcomes of these cases will likely set important precedents for federal regulation of employment practices, affecting how non-compete agreements and other contracts are managed.

We are committed to helping our dental practice clients understand these regulatory changes and will continue to provide updates on any developments that may impact your practice. 

HSA Limits Increased for 2025

In our effort to keep dental practices in Texas apprised of pertinent tax information, we wanted to let you know that the IRS recently announced the 2025 inflation adjustments for health savings accounts (HSAs) and health reimbursement arrangements (HRAs), reflecting the ongoing economic conditions. The adjustments show an increase in allowable contributions and cost thresholds for high-deductible health plans (HDHPs), which could impact financial planning for those utilizing these accounts and the available funds of your patients.

For individuals with self-only HDHP coverage, the maximum HSA contribution limit will rise to $4,300, up from $4,150. Those with family HDHP coverage will see their limit increase to $8,550 from $8,300. Additionally, the minimum deductible for an HDHP will increase slightly, as will the maximum out-of-pocket expenses allowed under the plan.

Additionally, the limit for excepted benefit HRAs will increase to $2,150, up from $2,100. These savings opportunities can play an important role in tax and overall financial planning. We encourage you to consider adjusting your contributions to take full advantage of the tax benefits provided by higher limits and prepare for increased health care costs associated with higher deductible and out-of-pocket limits.

Keeping up with these changes is crucial for optimizing healthcare spending and savings strategies next year. For more detailed information and assistance with financial planning and tax strategies, feel free to reach out to our team.

2009 Southwest Dental Conference

We’re getting ready for one of the industry’s biggest events, and we’d love to see you there! The 2009 Southwest Dental Conference will be held at the Dallas Convention Center on January 22, 23 and 24. It’s your opportunity to check out new products and services, build relationships and have a good time with your colleagues. While you’re there, look for the Edwards & Associates booth – #918 – across from Patterson Dental. We look forward to seeing you soon!

Southwest Dental Conference
January 22-24
Dallas Convention Center
650 S. Griffin Street
Dallas, TX 75202