Year-End Tax Moves for Medical Practices Under the New Tax Law

Picture a five-physician orthopedic group weighing whether to purchase a new imaging suite before the calendar turns. The equipment would improve patient care and add a new revenue stream, but the partners are also watching cash flow closely after a challenging reimbursement year. Decisions like this once hinged mostly on operational need. Today they also hinge on a set of tax rules that changed substantially in 2026, and the difference between acting now and waiting until spring can be measured in real dollars.

The One Big Beautiful Bill Act, signed into law in 2025, reshaped several provisions that matter directly to physician-owned practices. Many of those provisions are no longer theoretical. They are active for the 2026 tax year, and for practices that understand how to use them, the fourth quarter is the window in which to plan.

What Changed, and Why It Matters Now

Four provisions stand out for medical practice owners. The first is the permanent restoration of the 20 percent Qualified Business Income deduction, along with wider income thresholds that determine who qualifies. The second is the return of 100 percent bonus depreciation for qualifying equipment and property, which had been phasing down in recent years. The third is a substantial increase to the Section 179 expensing limit, now set at $2.5 million. The fourth is a temporary expansion of the federal deduction limit for state and local taxes, alongside continued access to state-level workarounds such as Kentucky's pass-through entity tax election.

Each of these provisions works differently, and each rewards a slightly different kind of planning. Taken together, they point toward the same conclusion: practices that take a fresh look at their tax position before year-end are likely to find opportunities that did not exist just a year or two ago.

Capital Investment: The Case for Buying Before Year-End

For practices weighing a major purchase, the return of full bonus depreciation is the headline change. Under current law, a practice that places qualifying equipment into service can generally deduct the entire cost in the year of purchase, rather than spreading that deduction across several years. Together with the higher Section 179 limit, this change gives many practices the ability to fully expense equipment purchases that would have been depreciated gradually under the old rules.

Consider the orthopedic group from our earlier example. If the practice purchases a $400,000 imaging system and places it into service before the end of the year, it may be able to deduct the full purchase price against 2026 income rather than recognizing a fraction of that deduction annually over five or seven years. For a profitable practice in a high tax bracket, that timing difference can translate into a meaningful reduction in this year’s tax liability, along with more cash available to reinvest in the practice.

The key word is timing. Equipment must generally be placed into service, not merely ordered, before the tax year closes for the deduction to apply. Practices considering a significant purchase should talk with their accountant well before December to confirm that delivery and installation timelines will support the deduction they are planning around.

The QBI Deduction: Why Income Level Matters More Than Ever

The QBI deduction allows eligible business owners to deduct up to 20 percent of their qualified business income, and the new law made this deduction a permanent part of the tax code rather than a provision set to expire. For physician-owned practices, though, the deduction has always come with a complication: medicine is classified as a specified service trade or business, which means the deduction phases out once taxable income crosses certain thresholds.

The good news for 2026 is that those thresholds moved higher. Practices and individual owners whose income placed them at or near the old phaseout range may now find that they qualify for a larger deduction, or qualify at all, under the updated limits. This is a meaningful shift for middle market practices, where physician-owner income often sits in exactly the range where these thresholds apply.

This is also where entity structure and compensation decisions start to matter a great deal. How a practice divides income between salary and distributions, and how it is structured for tax purposes, directly affects where an owner lands relative to the QBI thresholds. We explore that relationship in more depth in our next article, but for now the takeaway is simple: income level and QBI eligibility deserve a fresh look this year, even for practices that assumed the deduction did not apply to them in the past.

The State Tax Workaround Every Multi-Owner Practice Should Confirm

For practices with multiple owners, state taxes present a separate opportunity worth confirming before year-end. Federal law caps the amount of state and local taxes an individual can deduct on a personal return, a limit that has historically reduced the tax benefit of state income taxes paid by physician-owners in higher tax brackets.

Kentucky, like most states, now offers a workaround known as the pass-through entity tax, or PTET, election. Under this election, an eligible partnership, S corporation, or LLC can choose to pay Kentucky income tax at the entity level rather than passing that liability through to individual owners. Because the federal cap applies to individuals rather than businesses, this structure allows the practice to deduct the full amount of state tax paid as a business expense, while owners receive a credit for their share of the tax on their personal returns.

The Kentucky election is made annually and is binding once filed, which means practices need to decide before the deadline rather than after the fact. Multi-owner practices that have not confirmed their PTET election status for the current year should raise the question with their accountant now, since the benefit applies only to years in which the election is properly made.

A Year-End Action Checklist

Before the year closes, practice owners and administrators should walk through a short list of questions with their accountant. Has the practice confirmed whether the Kentucky PTET election has been made for this tax year? Are there equipment or facility upgrades under consideration that could be placed into service before December 31 to capture full bonus depreciation and the higher Section 179 limit?

Owners should also ask whether their income level and entity structure position them to benefit from the wider QBI thresholds, and whether estimated tax payments still reflect an accurate projection given these changes. None of these questions require an immediate answer, but each one benefits from being asked early enough to act on the answer.

Where to Go From Here

Tax law rewards practices that plan ahead of the calendar rather than reacting to it in April. The changes brought by the new tax law create real opportunities for medical practices willing to look closely at capital investment timing, income thresholds, and state tax elections before the year ends.

Baldwin CPAs works with medical and healthcare practices throughout Kentucky to turn changes like these into concrete plans rather than missed deadlines. If your practice has not yet reviewed its year-end tax position, now is the time to schedule that conversation.