You’ve got enough going on managing a practice. Between treating patients, hiring staff, and figuring out whether that next equipment upgrade is worth it, reading through a 900-page tax bill and trying to understand what the new tax law for dentists means is not exactly at the top of your list.
So we went ahead and read it for you.
President Trump signed the 2025 Tax Relief Act on July 4. And if you own a dental practice, are thinking about buying one, or are doing contract work as a 1099, this new law could save you a lot of money, both this year and long term.
Let’s break it down, starting with the biggest wins for dentists.
The 20 Percent QBI Deduction Is Now Permanent
If your dental practice is an S corp, partnership, or sole proprietorship, you’re probably already familiar with the 20 percent pass-through deduction. It’s been around since 2018 and lets you deduct 20 percent of your qualified business income on your personal tax return.
Originally, this was set to expire in 2025. But now it’s permanent, which is a huge deal.
That means if your practice earns, say, $300,000 in net income, you could keep deducting $60,000 of that before calculating your personal tax bill. This change gives you some real stability going forward, and if you’re getting close to the income threshold where this deduction phases out, it’s a good time to revisit your compensation strategy or retirement contributions to make sure you still qualify. There are SSTB limitations which phase out the deduction once you reach a specific threshold ($200,000 for Single and $400,000 for MFJ).
100 Percent Bonus Depreciation Is Back
Let’s say you are replacing a cone beam CT scanner, updating the front office, or expanding into a second location. Under the old rules, you would have to spread out those deductions over several years. But starting in January 2025, you can deduct the full cost upfront.
That includes equipment, furniture, computers, and even improvements to your building. Being able to write off the full amount in one year helps reduce your tax bill when you are spending heavily on growth. That means more cash stays in your practice.
If you have been holding off on a big equipment investment or remodel, this change might make it worth moving forward now.
You can also take the deduction, even if you have a loss in the business. Something you can’t do with Sec 179.
Section 179 Limits Are Higher Too
Bonus depreciation is not the only way to deduct large purchases quickly. Section 179 is another rule that lets you write off equipment, software, and building upgrades in the same year you buy them, but it comes with annual limits and phaseouts.
The new law increases those limits and expands access. For dentists who are remodeling, rebranding, or investing in technology, this creates more room to deduct what you are already spending.
Section 179 is often useful when you are making multiple mid-sized purchases instead of one large one. You can still get a full deduction without relying on bonus depreciation.
R&D Expenses Are Fully Deductible Again
Dentists might not think of themselves as doing research and development, but many practices invest in tools or systems that qualify.
Maybe you built a custom scheduling system or hired developers to create a patient portal. Maybe you integrated a bunch of systems together to improve efficiency. Under the old rules, you had to deduct those costs slowly over five years.
Now, those expenses are deductible in the year they happen. Even better, you may be able to amend prior-year tax returns to claim deductions you missed. It is worth reviewing whether you have already spent money in this area or have new projects in the works.
Real Estate Strategy Just Got More Powerful
If you own your practice building or are thinking about buying one, the new tax law gives you some helpful advantages.
With bonus depreciation back at 100 percent, you can write off certain parts of the building like cabinetry, flooring, HVAC, or lighting right away instead of over decades. This creates big tax savings upfront, especially when combined with equipment purchases or a buildout.
It also opens the door to using real estate to reduce your overall tax bill.
For example, one dentist we worked with bought a practice for around 950,000 dollars and a short-term rental property for 450,000 dollars in the same year. Between equipment in the new practice and improvements to the rental, she was able to deduct about 300,000 dollars using bonus depreciation.
Because she actively managed the rental, she qualified to use those losses to offset her clinical income. That dropped her taxable income from about 400,000 dollars to 100,000 dollars. Her tax bill went from around 100,000 dollars to just 10,000 dollars in a single year.
This kind of planning takes coordination, but you do not need to be buying two properties to benefit. Even just purchasing the building your practice operates in can unlock significant deductions if it is structured correctly.
You Can Deduct More Interest on Loans
The formula for deducting interest on business loans is changing in a way that benefits dentists.
In the past, the IRS only allowed interest deductions up to a certain amount, based on your earnings before interest and taxes. Now, that formula includes depreciation and amortization too, which increases how much interest you can deduct.
If you have a practice loan, are financing a buildout, or are carrying working capital debt, this means more of your interest payments will be deductible. That is good news if you are still growing or refinancing for better terms.
Selling Your Practice? There’s a New Way to Reduce Taxes on the Exit
If your dental group is structured as a C corporation and you are planning to sell one day — maybe to a DSO or a private equity firm — this update could be a big deal.
The rules around Qualified Small Business Stock (QSBS) now allow you to exclude up to 100 percent of your capital gains from taxes, as long as you meet the holding requirements. That starts at three years for a 50 percent exclusion and jumps to 100 percent after five years.
The total amount you can exclude has also gone up. If you are building toward an exit and your entity qualifies, this could protect millions of dollars from taxation. It is something to consider early, because it only works if your structure and shares meet certain requirements ahead of time.
A Few Other Updates Dentists Should Know About
There are some smaller updates that may still be relevant depending on your situation:
- The limit on excess business losses is now permanent. If you have other investments or rental real estate that show large paper losses, this may affect how much of those losses you can use each year.
- The pass-through entity tax election (PTET) is still available in states with high state income tax. This is a helpful strategy for S corporations to preserve deductions on state taxes.
- Opportunity Zones will now follow a rolling 10-year designation. If you are investing in real estate within one of these areas, the new rule makes it easier to time those investments.
- The IRS now has six years to audit Employee Retention Credit claims, and penalties have increased. If your practice filed for the ERC, make sure your records are organized and defensible.
And a Quick Note on Personal Tax Changes
While most of this new law focuses on business owners, there are a few updates on the personal side too:
- Federal tax brackets and standard deductions are now permanent
- The estate and gift tax exemption is increasing to 15 million dollars per person
- There is a new 6,000 dollar deduction for people age 65 and up
- The child tax credit is increasing to 2,200 dollars per child starting in 2026
- Temporary deductions will be available between 2025 and 2028 for tip income, overtime pay, and auto loan interest
- A new child retirement account allows up to 5,000 dollars in annual contributions, plus a 1,000 dollar government match for eligible families
What You Should Do Now
This tax law gives dentists more room to grow, save, and plan. Whether you are upgrading your technology, buying a building, hiring your first associate, or thinking about your long-term exit, there is something in this law that can support that next move.
This is a good time to:
🗹 Review your practice’s entity structure
🗹 Talk through any equipment or real estate purchases you are planning this year
🗹 Look back at your tech investments to see if you qualify for R&D deductions
🗹 Make a plan for handling interest deductions and income thresholds
🗹 Explore how your long-term goals align with the updated QSBS rules
If you are not sure where to start, we can help.
Our team at Virjee Consulting works with dental practice owners across the country, and we are happy to take a look at your situation and walk you through the best options.
Just reach out through our 24-hour form and we will get a time on the calendar.
Let’s make the most of what this new law makes possible.
Until next time!
