The One Big Beautiful Bill: Planning Opportunities for Clinicians and Practice Owners

For clinicians and practice owners with taxable income between $400,000 to $600,000, these changes create overlapping phaseout ranges and shifting bracket dynamics that can meaningfully increase effective tax rates. Understanding these three thresholds—and how to engineer income around them—is central to tax strategy in 2025 and beyond. 

Qualified Business Income Deduction (QBID)

The OBBBA made the 20% QBID permanent, removing uncertainty that it would sunset after 2025 under prior law. Starting in 2026, the income phaseout thresholds are wider, giving more taxpayers room to qualify. Currently, the phaseout thresholds are $197,300 to $247,300 for single filers and $394,600 to $494,600 for married couples filing jointly. In 2026, it’s scheduled to be expanded by $50,000 for single filers and $100,000 for joint filers, with the phaseout range growing from $100,000 to $150,000. For clinicians with substantial pass-through income including 1099 contractors, S-corps, partnerships, and sole proprietors, preserving eligibility for QBID can create significant tax savings—often tens of thousands of dollars annually.

State and Local Tax (SALT) Deduction Expansion

The Tax Cuts and Jobs Act (TCJA) capped itemized deductions for state and local taxes at $10,000 per year, regardless of income level. The OBBBA lifts that cap substantially, but with new complexity.

For taxpayers with under $500,000 taxable income and married filing jointly, SALT deduction increases to $40,000. For income above $500,000, the additional deduction phases out at 30% of income above the threshold. By the time taxable income reaches $600,000, the extra benefit is fully eliminated. This creates what some describe as a “shadow tax bracket”—income in this band effectively faces an additional 30% burden due to the phaseout of the deduction. In practical terms, $100,000 of additional income between $500,000 and $600,000 can feel like $130,000 of taxable income. The expanded SALT deduction is scheduled to sunset after 2029, reverting to the $10,000 cap in 2030.

The Breakdown of Income Bracket Progression

The $400,000 to $600,000 income band for married filing jointly filers is especially impactful because it overlaps with three tax brackets:

• 24% bracket: $206,700 to $394,600
• 32% bracket: $394,600 to $501,050
• 35% bracket: $501,050 to $751,600

When combined with the QBID and SALT phaseouts, the marginal rate dynamics in this range require active planning. Without intervention, clinician-owners may find that additional income is subject to a far higher effective tax rate than expected.

Income Engineering for Practice Owners

Practice owners have a variety of levers available to manage taxable income. Each of these tools can help smooth taxable income across years, particularly around critical phaseout ranges:

• Qualified retirement plans: Shift income into the future through 401(k), cash balance, or other defined benefit arrangements.
• Employing children: Modify income down a generation by employing children in the practice, subject to age and labor rules.
• Charitable strategies: Accelerate giving through a donor-advised fund or align donations with marketing initiatives.
• Practice reinvestment: Reallocate into the business and leverage depreciation strategies for tax deferral.

Options for W-2 Clinicians

While W-2 employees have fewer levers to pull, they can still benefit from these opportunities:

• Student loan repayment benefits: Up to $5,250 annually can be provided tax-free to the employee and deductible to the practice.
• Qualified deferred compensation: Some clinicians may be able to self-fund employer contributions to qualified plans if allowed by your contract and employer.
• Non-qualified deferred compensation (NQDC): Where available, NQDC plans can provide significant tax deferral opportunities.
• Employment classification: In some cases, shifting from W-2 to 1099 status may offer flexibility. However, this should meet IRS control tests and should be carefully evaluated with legal and tax advisors.

Using Pass-Through Entity Tax (PTET) as a Workaround

For practice owners above the SALT phaseout, the pass-through entity tax (PTET) continues to be an effective planning tool. PTET allows SALT expenses to be deducted at the entity level, bypassing the federal individual cap. For high earners of $600,000 and above, PTET may be advisable. For those near the phaseout range, the decision may depend on state law, administrative costs, whether the taxpayer itemizes, and the availability of full SALT recapture under local PTET rules.

The OBBBA has reshaped the landscape for high-income clinicians and practice owners. For those in the $400,000 to $600,000 range, overlapping phaseouts and bracket creep can create far higher effective tax rates than headline brackets suggest. Careful planning—whether through qualified plans, charitable giving, PTET elections, or contract negotiations—is critical to minimizing tax drag and aligning cash flow with long-term goals.  If you have questions about how the One Big Beautiful Bill could impact your practice, our team would love to help. Schedule a conversation with a practice integration advisor today!   

Sources: https://www.congress.gov/bill/119th-congress/house-bill/1/text

https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025

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