The One Big Beautiful Act just passed Congress and awaits the President’s signature. This massive budget reconciliation bill changes the financial landscape for physicians and high earners. The legislation affects taxes, healthcare programs, and investment strategies in ways that directly impact medical professionals.

Understanding these changes helps physicians make smart financial decisions. The bill extends tax cuts, modifies healthcare programs, and creates new opportunities for wealth building. However, it also eliminates some benefits and changes funding for programs that serve your patients.

Major Tax Changes That Help Physicians

Permanent Tax Cuts and Jobs Act Extension provides the biggest financial benefit for high-earning physicians. The 2017 tax cuts were set to expire at the end of 2025. Without this extension, physicians could have faced tax increases of up to 62%. The new law keeps the top income tax rate at 37% instead of letting it rise to 39.6%.

A cardiologist earning $500,000 annually saves approximately $13,000 per year compared to what they would have paid under the old tax rates. Over a decade, this represents $130,000 in additional wealth that can be invested or used for practice expansion.

Increased Standard Deduction helps all taxpayers, including physicians. Single physicians get an extra $1,000 deduction, while married physician couples receive $2,000 more. Additionally, physicians over 65 get a temporary $6,000 bonus deduction through 2028.

This change particularly benefits younger physicians who don’t yet have significant itemized deductions. A resident or new attending might save $200-600 annually in taxes from this provision alone.

No Tax on Overtime and Tips creates opportunities for certain physician income. The law eliminates taxes on overtime pay and tips through 2028, though it excludes those above certain income thresholds. Emergency physicians, hospitalists, and other specialists who work significant overtime hours could benefit substantially.

An emergency physician earning $50,000 in annual overtime pay could save $12,000-18,000 in taxes depending on their total income level. However, high-earning physicians may not qualify for this benefit due to income limitations.

Enhanced State and Local Tax (SALT) Deduction provides massive savings for physicians in high-tax states. The deduction increases from $10,000 to $40,000, with 1% annual increases through 2029. This change particularly benefits physicians in states like California, New York, and New Jersey.

A physician in California paying $35,000 in state income and property taxes can now deduct $40,000 instead of just $10,000. This saves approximately $7,000-11,000 annually in federal taxes for physicians in the 37% bracket.

Increased Estate Tax Exemption helps wealthy physicians with estate planning. The exemption rises from $13.99 million to $15 million for individuals and from $27.98 million to $30 million for married couples. This change provides more flexibility for transferring wealth to children and grandchildren.

A successful specialist with a $20 million estate now has additional room for tax-free wealth transfers. This change eliminates the urgency many physicians felt to complete estate planning before the previous exemption expired.

Small Business Benefits for Physician Practices

Expanded Section 199A Deduction helps physicians who own their practices. This small business deduction allows eligible physicians to deduct up to 20% of their business income. The new law expands this deduction to include more types of medical practices and services.

A physician practice owner earning $400,000 in business income could deduct $80,000, saving $20,000-30,000 annually in taxes. This benefit particularly helps physicians who structure their practices as pass-through entities.

100% Immediate Expensing returns for medical equipment and technology. Physician practices can immediately deduct the full cost of new equipment, computers, and software instead of depreciating these items over several years. This provision helps practices invest in new technology while reducing current-year taxes.

A radiology practice buying $200,000 in new imaging equipment can deduct the entire cost in the purchase year, potentially saving $50,000-75,000 in taxes. This cash flow benefit helps practices upgrade equipment and stay competitive.

Car Loan Interest Deduction provides a new tax benefit for vehicle purchases. Physicians can deduct up to $10,000 in auto loan interest for U.S.-made vehicles through 2029. This benefit helps physicians who use vehicles for practice-related travel or who purchase expensive vehicles.

A physician financing a $75,000 American-made SUV at 6% interest could deduct approximately $4,000-4,500 in interest during the first year, saving $1,000-1,700 in taxes.

Healthcare Program Changes That Affect Your Patients

Medicaid Funding Cuts reduce program funding by $700 billion over 10 years. The legislation implements work requirements for able-bodied adults and eliminates benefits for undocumented immigrants. These changes could reduce the number of patients eligible for Medicaid coverage.

Physicians serving large Medicaid populations may see reduced patient volumes or increased uncompensated care. Primary care physicians and those working in safety-net hospitals face the greatest potential impact from these changes.

Medicare Part A and HSA Changes create new opportunities for working physicians. The law allows physicians still working while enrolled in Medicare Part A to continue contributing to Health Savings Accounts if they have high-deductible health plans.

A 67-year-old physician earning $200,000 annually can contribute $5,150 to an HSA (including the $1,000 catch-up contribution) while receiving Medicare benefits. This provides additional tax-deferred savings opportunities for physicians who continue working past traditional retirement age.

Affordable Care Act Modifications change enrollment processes and reduce some subsidies. The law ends automatic reenrollment, requires annual income verification, and shortens the open enrollment window. These changes may affect patients who rely on ACA marketplace coverage.

Physicians may need to help patients navigate these changes or see shifts in insurance coverage among their patient population. Practice administrators should prepare for potential changes in insurance verification processes.

Investment Strategy Implications

Increased After-Tax Income from tax cuts provides more money for investment. Physicians should review their investment strategies to ensure they maximize the benefits of increased cash flow. Higher take-home pay allows for increased retirement contributions and taxable investment account funding.

A physician saving an additional $20,000 annually from tax cuts could accumulate an extra $500,000-800,000 over 20 years through disciplined investing. This additional wealth can significantly accelerate retirement planning goals.

Repeal of Clean Energy Tax Credits affects investment strategies focused on renewable energy. The law phases out incentives for electric vehicles, wind, and solar energy investments. Physicians who invested in these areas for tax benefits should reassess their strategies.

However, the elimination of these credits may create opportunities in traditional energy investments. Physicians should discuss with their advisors whether to reallocate investments from clean energy to other sectors.

529 Education Account Expansion provides new uses for education savings. The law allows 529 funds to pay for K-12 tutoring, textbooks, test preparation, and homeschool materials. It also covers special education expenses like speech therapy and occupational therapy.

Physicians with children can use 529 accounts more flexibly, potentially saving thousands in education expenses. A physician spending $5,000 annually on tutoring and test preparation can now use tax-advantaged 529 funds instead of after-tax money.

Estate Planning Opportunities

Higher Estate Tax Exemptions reduce the urgency for complex estate planning strategies. Many physicians who rushed to complete gift transfers before the previous exemption expired can now reconsider their approach. The higher exemption provides more flexibility for wealth transfer strategies.

However, physicians should still maintain comprehensive estate plans. The exemption could change again in future legislation, and proper planning helps minimize taxes and ensure smooth wealth transfers regardless of exemption levels.

Newborn Savings Accounts create new wealth-building opportunities for physician families. The government provides $1,000 initial funding for these accounts, and parents can contribute up to $5,000 annually after-tax. These accounts offer tax-advantaged growth for long-term savings.

A physician contributing $5,000 annually to a newborn’s account could accumulate $200,000-300,000 by the child’s 18th birthday. This provides substantial funding for education or other major expenses.

Potential Challenges and Considerations

Student Loan Forgiveness Repeal eliminates the Biden-era forgiveness program. Physicians carrying significant student loan debt lose this potential benefit. However, existing Income-Driven Repayment plans and Public Service Loan Forgiveness programs remain available.

A physician with $250,000 in student loans loses the possibility of broad forgiveness but can still pursue targeted forgiveness programs. This change emphasizes the importance of strategic loan repayment planning.

Remittance Tax affects physicians who send money to family members in other countries. The law imposes taxes on cash payments sent by non-citizens to their home countries. This primarily affects international medical graduates and physicians with family abroad.

Physicians should understand how this tax applies to their specific situation and consider alternative methods for supporting family members internationally.

Action Steps for Physicians

Review Tax Planning Strategies immediately to capture the benefits of new tax laws. Meet with your tax advisor to adjust withholding, estimated tax payments, and year-end planning strategies. The permanent extension of tax cuts provides long-term planning certainty.

Maximize Retirement Contributions using the additional cash flow from tax savings. Consider increasing 401(k) contributions, funding backdoor Roth IRAs, or contributing to other tax-advantaged accounts. The extra money from tax cuts can significantly boost retirement savings.

Reassess Investment Allocations based on changed tax incentives and increased investable income. Work with your financial advisor to ensure your portfolio takes advantage of new opportunities while avoiding sectors that lost tax benefits.

Update Estate Planning Documents to reflect new exemption levels and planning opportunities. While the urgency for immediate action has decreased, proper estate planning remains crucial for wealth preservation and transfer.

Prepare for Healthcare Changes by understanding how Medicaid and ACA modifications might affect your patient population. Consider how these changes could impact practice revenue and patient care delivery.

Long-Term Financial Planning Considerations

Practice Valuation and Sale may be affected by new tax laws. Physicians planning to sell their practices should consider how tax changes impact valuations and sale structures. The enhanced small business deduction and equipment expensing provisions may increase practice values.

Geographic Considerations become more important with the enhanced SALT deduction. Physicians in high-tax states receive significant benefits, while those in low-tax states see less impact. This might influence decisions about practice location or retirement destinations.

Succession Planning for physician practices should incorporate new tax benefits. The enhanced small business deduction and estate tax exemptions provide more flexibility for transferring practices to family members or junior partners.

Final Recommendations

The One Big Beautiful Bill creates significant opportunities for physician financial planning. The combination of extended tax cuts, enhanced deductions, and new savings opportunities provides substantial benefits for medical professionals. However, changes to healthcare programs and elimination of some benefits require careful consideration.

Physicians should work with qualified financial advisors, tax professionals, and estate planning attorneys to fully capitalize on these changes. The permanent nature of many provisions allows for long-term planning, but the complexity of the legislation requires professional guidance to navigate effectively.

Start by calculating your potential tax savings and developing strategies to invest or save the additional money. Review your estate plan in light of higher exemptions, and consider how healthcare program changes might affect your practice and patients.

The most successful physicians will be those who act quickly to understand and implement strategies that take advantage of these new opportunities while preparing for potential challenges. The financial benefits are substantial, but they require proactive planning and professional guidance to maximize their impact on your long-term wealth building goals.

This post is for informational purposes only and does not constitute investment advice. Always conduct thorough research and consult with financial professionals before making investment decisions.

About the Author: Dr. BWMD is a practicing physician and parent who writes about the intersection of medicine and personal finance. When not seeing patients or writing about physician finances, he enjoys spending time with his family and teaching the next generation of medical professionals about the importance of financial wellness.

• X
• Bluesky