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The proposed tax legislation known as “The One Big Beautiful Bill“ is making its way through Congress and, if passed, will reshape both personal and business taxes for millions of Americans. For therapists, psychologists, psychiatrists, and other mental health professionals running small practices, it offers a mix of opportunity and complexity.
In this post, we break down what you need to know and how to plan ahead.
✅ The Good News for Therapists and Small Practices
1. Bigger & Permanent Deduction for Business Income (Section 110005)
What it is: The Qualified Business Income (QBI) deduction lets S-Corps and sole proprietors deduct a portion of their business income. Currently this is set to expire as of 12/31/25. The bill proposes making this deduction permanent and increasing it from 20% to 23%.
Why it matters: This reduces your taxable income, especially valuable for practice owners earning between $125,000 and $500,000.
Tax Tip: Consider whether your current structure (S-Corp vs. sole proprietorship) is optimized to fully take advantage of this deduction.
2. Simpler Write-Offs for Office Equipment & Improvements (Sections 111001, 111103)
What it is: The bill restores 100% bonus depreciation through 2029 and raises the Section 179 expensing cap to $2.5 million.
Why it matters: You can write off the full cost of new computers, therapy room furniture, EHR software and even some business vehicles in the year you buy them.
Tax Tip: If you’re planning upgrades or expansion, consider timing those purchases before the end of the year.
3. R&D Expensing for Digital & Practice Innovations (Section 111002)
What it is: Allows immediate expensing of domestic research and development costs.
Why it matters: If you’re building a custom HIPAA-compliant patient portal or analytics tools, you can deduct the full cost in year one.
Tax Tip: Keep detailed records and work with a tax advisor to document qualifying activities.
4. Less Paperwork for Contractors (Section 111105)
What it is: The 1099-NEC threshold increases to $2,000.
Why it matters: You don’t need to issue the annoying 1099 forms unless you pay a contractor more than $2,000 in a calendar year (current threshold is just $600).
Tax Tip: Review how you classify assistants, billers, and marketing consultants, and confirm you’re meeting IRS standards.
5. Higher Child Tax Credit (Section 110004)
What it is: The child tax credit increases to $2,500/child (2025–2028), then adjusts for inflation.
Why it matters: More families will qualify and receive higher refunds.
Tax Tip: Ensure your filing status and dependent information are up to date.
6. Higher Standard Deduction = Lower Taxable Income (Section 110002)
What it is: The standard deduction is permanently doubled and temporarily boosted through 2028.
Why it matters: Many therapists don’t itemize deductions. This change keeps more income tax-free.
Tax Tip: Run the numbers to see if itemizing still makes sense compared to the new standard deduction.
7. Easier Access to Paid Leave Credit for Employers (Section 110106)
What it is: Makes the Paid Family Leave Credit permanent and easier to qualify for.
Why it matters: If you employ admin staff or other clinicians, you may qualify for a significant credit.
Tax Tip: Set up a written policy now and track employee eligibility.
8. Expanded Use of HSAs for Fitness (Section 110208)
What it is: Allows up to $500/person or $1,000/family to be spent on gym memberships and fitness classes.
Why it matters: Health-related self-care becomes more tax-efficient.
Tax Tip: Consider combining this with an HDHP to fully fund your HSA.
9. New Deduction for Car Loan Interest (Section 110104)
What it is: Allows up to $10,000/year of interest on U.S.-assembled car loans to be deducted.
Why it matters: A big break for those who drive to multiple office locations or home visits.
Tax Tip: The deduction phases out at $200K income for joint filers, or $100k for single filers. Plan purchases accordingly.
10. Expanded Use of 529 Plans (Sections 110110–110111)
What it is: 529 funds can now be used for tutoring, testing, home school expenses, and professional credentials.
Why it matters: More flexibility for therapists with school-age children or for continuing education.
Tax Tip: Coordinate with your education planning. Contributions may still offer state tax deductions.
11. MAGA (Money Accounts for Growth & Advancement) Accounts for Kids (Sections 110115–110116)
What it is: Allows up to $5,000/year in after-tax contributions for a child’s education, first home, or small business. For kids born between 1/1/24-12/31/28, Uncle Sam will even contribute $1,000 to jump-start the savings!
Why it matters: Tax-advantaged growth for long-term goals. Think of these as 529 plans with more expanded uses of the funds.
Tax Tip: Funds can be used tax efficiently for educational or entrepreneurial purposes beginning at age 18, and for any purpose at age 30.
⚠️ The Not-So-Good News
1. Personal Exemptions Stay Repealed (Section 110003)
Impact: You still can’t deduct $4,000+ per household member. This hits larger families hardest. Then again, we haven’t had these exemptions since prior to 2018.
Planning Tip: Offset this with higher standard deductions or credits (like the CTC).
2. Itemized Deduction Cap for High Earners (Section 110011)
Impact: High earners (those in the highest tax bracket) can only deduct up to 35% of itemized deductions.
Planning Tip: Review whether charitable giving or mortgage interest is still providing the value you expect.
3. Miscellaneous Deductions Gone for Good (Section 110010)
Impact: No deductions for licensing, CEUs, or unreimbursed expenses. We also haven’t had these deductions since prior to 2018.
Planning Tip: Set up an accountable plan if you operate as an S-Corp to reimburse yourself tax-free.
4. Green Energy & EV Credits Repealed (Sections 112001–112015)
Impact: No more incentives for clean vehicles or energy upgrades – including solar panels. Ouch.
Planning Tip: If you’re considering an EV or solar investment, act before 12/31/25 so you can still capture the current tax credits.
📊The Grey Area
SALT Deduction Cap Increased for Some, Remains for Others (Section 112018)
Impact: For taxpayers with income under $400,000, the cap on itemized deductions for state and local taxes would increase from $10,000 to $30,000. For those earning over $400,000, the cap would be gradually reduced down to the current $10,000 limit.
Planning Tip: If your income will be under the $400,000 limit, consider preparing your state and local Q4 estimated taxes in 2025 in order to capture more deductions. Note that of all the proposed tax changes in the bill, this SALT issue is probably the most hotly contested across both aisles in Congress. We’ll have to see what eventually happens with this one.
💡 Planning Ahead
This bill is not yet law, but planning now gives you a head start. Here are steps to consider:
- Revisit your business structure
- Evaluate major purchases before year-end
- Update employee policies for paid leave
- Review HSA/529 strategies
- Plan vehicle purchases or financing
- Consider making solar/EV purchases before 12/31/25
Want help putting this into action?
Book a tax planning session now to make sure you’re ready for what’s ahead.
This article is for informational purposes only and should not be considered tax advice. Please consult your tax professional for personalized guidance.
