Impacts of Recent Legislative Changes on Dental Practices

The past year brought numerous legislative updates through the One Big Beautiful Bill Act (OBBBA) that are reshaping how dental practices manage taxes, staffing, and compliance. From expanded Section 179 deductions to changes in employee retention credits, these developments present both challenges and opportunities for dental business owners.

This article examines the key legislative updates impacting dental practices and offers actionable strategies to adapt.

Tax Changes

The OBBBA made many provisions from the Tax Cuts and Jobs Act permanent, including:

• 100% Bonus Depreciation: Immediate deduction for equipment costs.
• QBI Deduction: Up to 20% for pass-through entities, subject to income limits.
• SALT Deduction Increase: Up to $40,000 for adjusted gross income (AGI) under $500,000.
• IRC Sec. 179: Expense deduction limit raised to $2.5 million.
• IRC Sec. 174A: R&D expenses are deductible starting in 2025, with retroactive options.
• 529 Plan Expansion: Credentialing expenses now qualify.

While these will generally all benefit dental practices and dentists, many of them have income or other restrictions. For instance, dentists are considered to be engaged in a “specified services trade or business.” Once they fully exceed the phase-out thresholds, they will lose the ability to take any QBI deduction. SALT deductions phase out at AGI over $600,000, limiting the taxpayer to a deduction of $10,000. Higher earners in the 37% bracket will see itemized deductions reduced by 2/37ths. The alternative minimum tax threshold drops to $500,000 ($1 million for joint filers) in 2026.

Provisions to restrict state-level pass-through entity taxes (PTETs) were removed, allowing high-income taxpayers to continue using PTETs to bypass SALT caps.

Medicaid Changes

Medicaid provides low-cost coverage to low-income individuals and is jointly funded by the federal and state governments. States may impose a “provider tax” of up to 6% of net patient revenue, which federal funds match. Starting October 1, 2026, this rate will decrease annually by 0.5% until it reaches 3.5% in 2031, potentially resulting in reduced state Medicaid budgets.

States often utilize Managed Care Organizations (MCOs) to deliver Medicaid services and establish provider payment rates through State Directed Payments (SDPs). Previously, rates could match commercial averages. Under OBBBA, SDP rates are capped at 100% of Medicare rates for expansion states and 110% for non-expansion states.

Impacts of Changes on Dental Practices

States may cut optional adult dental services to offset funding losses. Adults earning 100-138% of the poverty level may face copays of up to $35, including dental visits. While only Minnesota includes dental practices in its provider base, SDP changes may reduce reimbursements for dental providers in MCO networks.

Student Loan Changes

The OBBBA contained significant changes to student loans, which could create new limitations on options for dental students. Starting July 1, 2026:

• Federal Direct PLUS Loans: Eliminated for graduate/professional students.
• Unsubsidized Loans: Annual limits of $20,500 for graduate students and $50,000 for professional students.
• Aggregate Borrowing Cap: $200,000 lifetime limit; Parent PLUS loans capped at $65,000.

With dental school costs ranging from $230,000 to $400,000, students may need to consider private loans or reconsider a career in dentistry altogether.

Repayment options are also reduced. After June 30, 2026, only Income-Based Repayment (IBR) and Repayment Assistance Plan (RAP) will be available:

• RAP: 10% of discretionary income for AGI over $100,000, with a 30-year term.
• IBR: 10-15% repayment over 20-25 years, adjusted for family size.

How to Address the Impacts of the OBBBA

The OBBBA contains the good, the bad, and the ugly for dental practices and practitioners. You should take proactive steps to protect and grow your dental practice. This includes:

Review Your Tax Strategy

Engage a tax advisor to fully optimize your tax strategy. Focus on maximizing new deductions (such as 100% bonus depreciation and higher Section 179 limits), leveraging pass-through entity taxes to improve your state tax position, and claiming all new small business credits. Crucially, review your entity structure to help optimize the Qualified Business Income (QBI) deduction despite potential phase-outs.

Assess Medicaid Impacts

If you serve a Medicaid patient, prepare for potential reimbursement changes and copays and adjust your service offerings as needed. Consider how tax reductions and rate caps may affect your revenue streams.  

Communicate with Your Team

Share key changes and strategies with your staff so everyone understands how new laws affect daily operations and long-term planning.

Stay Informed and Start Planning

As Congress continues refining post-pandemic tax incentives, practices that stay proactive in tax strategy, staffing compliance, and capital investment will be positioned for sustainable growth.

Schedule a planning session with EisnerAmper’s Dental Advisory team to assess your exposure, uncover savings opportunities, and position your practice for success under the latest legislation.