Learn how to stay profitable with the changes of the new tax law that redefines deductions and credits for therapy clinics.
Tax changes are complex, no question there. But they’re also manageable if you act deliberately. Let's break down the key aspects for health providers of the 2025 tax bill, informally known as the One Big Beautiful Bill Act (OBBBA).
Who is most impacted? What do these reforms mean for providers? Let's figure it out.
The centerpiece of the One Big Beautiful Bill Act (OBBBA), a budget reconciliation tax bill passed in June 2025, is that it extends many Tax Cuts and Jobs Act (TCJA) provisions that were set to expire, as well as introduces new tax relief measures.
Let's go deep on the major changes for health practitioners.
If you’re running a pass-through health entity you can now permanently deduct 20% of your business income.
How does it work? A clinic operating as an S‑corp or partnership can deduct 20% of its net service income. If the clinic’s net profit is $200K, they can deduct $40K and be taxed for $160K.
That’s a meaningful swift. This deduction is crucial for independent practices to stay afloat.
Say goodbye to depreciating expensive therapy equipment over multiple years. To spur investment, the bill restores 100% bonus depreciation for business assets.
Clinics can again write off the entire cost of new equipment and technology in the year of purchase.
For example, a speech clinic upgrading to new AAC devices, or a physical therapy group adding rehabilitation equipment will improve cash flow since these purchases become fully deductible immediately.
The maximum immediate write-off for qualified business property jumps from $1.1 million to $2.5 million.
These expansive provisions make improvements more affordable. You spend now, you save now. Simple as that.
Paperwork related to Forms 1099, needed for independent contractors, freelancers, or part-time employees, has finally gotten lighter.
OBBBA raises the threshold for Internal Revenue Service (IRS) information reporting, from $600 to $2,000 annually, meaning fewer forms to be issued and fewer administrative headaches.
For instance, a therapy clinic that pays $1,500 a year to an independent contractor such as a part-time dietitian or IT support technician, would no longer face the 1099 filing form
Paid leave credits are here to stay! The new legislation also made certain credits permanent that can benefit healthcare employers and staff. Notably, it extends a tax credit, for employers who offer paid family and medical leave.
A therapy practice that pays staff for maternity leave or caregiving leave may now claim a credit for a portion of those wages each year.
OBBBA further introduced temporary above-the-line deductions to eliminate taxes on overtime pay and tips for workers through 2028 and up to $12,500 for singles and $25,000 for couples who do joint tax returns.
This means that front-line healthcare employees such as nurses or support staff can pull long hours without paying on a portion of their overtime earnings.
Keep an eye on your state legislature since many states have complemented federal relief with their own tax tweaks in 2024–2025. According to the National Conference of State Legislatures, virtually every state has enacted some form of tax cut or credit recently.
By and large, these tax changes favor smaller, independent practices. Therapy clinics, physician groups, and outpatient centers structured as pass-throughs will see continued tax savings from the extended 20% Qualified Business Income (QBI) deduction and faster write-offs for investments, if their income is within limits established by the law.
In contrast, the big hospitals, especially non-profits, get fewer direct tax perks because you can’t exactly benefit from income tax cuts if you don’t pay income tax.
The tax bill is a double-edged sword: it grants providers tax relief on one hand, but could indirectly squeeze healthcare revenues on the other. What does this mean for health practitioners? This is the tough part. To pay for these tax goodies, OBBBA slashes about $930 billion from Medicaid. Over 11.8 million Americans may lose coverage.
The American Hospital Association warned the Senate that OBBBA’s Medicaid provisions would cut $930 billion from Medicaid and result in 11.8 million Americans losing coverage. The Medical Group Management Association (MGMA) likewise decried the bill “stripping healthcare coverage from millions of Americans” and leaving physicians to “pick up the enormous tab” of uncompensated care.
In practical terms, many outpatient clinics and therapy practices could see an uptick in uninsured patients or lapses in patient insurance authorizations, especially in states that may roll back Medicaid expansion or where Affordable Care Act (ACA) marketplace subsidies expire.
The new tax legislation delivers meaningful financial breaks to therapy clinics and medical practices. Preserved tax rates and deductions should help health practitioners with profitability and reinvestment.
At the same time, clinics serving high numbers of Medicaid or exchange-insured patients must brace for potential coverage losses and cash-flow pressure if the bill’s healthcare cuts take effect.
Definitely, the One Big Beautiful Bill Act (OBBBA) marks a turning point for independent health providers. For therapy clinics willing to adapt, there’s real potential to boost profitability, modernize operations, and reinvest in growth. But staying ahead also means understanding how policy shifts may affect your patient base. With clarity, strategy, and the right tools, you can navigate these changes and build a more resilient practice.
To help your practice navigate the 2025 tax reforms, consider leveraging specialized resources. Solum has been focused on healthcare solutions and could provide valuable downloadable tools alongside. Solum's AI-powered front-office tools help automate patient intake, scheduling, eligibility checks, prior authorizations, and more!
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