President Donald Trump signed the highly touted One Big Beautiful Bill on July 4, 2025, meeting an ambitious, self-imposed deadline he set out for the bill when it was originally submitted to Congress. The much-anticipated, 900-plus page legislation has wide ranging impacts and is especially meaningful to dentists in the areas of income tax and student loans. This article aims to identify and discuss the most-relevant elements of the One Big Beautiful Bill (OBBB) for Michigan dentists.
Those of you who have heard Ted Schumann’s thoughts on markets and economy recently have probably heard him refer to Trump as America’s “new-used” president — an obvious reference to Trump’s non-consecutive second term and an inference that the Trump administration’s style and priorities have been seen before, during his first administration. This has materialized in the OBBB, as an overarching theme of the bill was a successful effort by the administration to extend and/or make permanent much of the tax policy that originated in the 2017 Tax Cuts and Jobs Act, the sweeping tax legislation from Trump’s first administration that resulted in major overhaul of both individual income tax as well as corporate tax.
Though pundits will likely continue to analyze the economic costs and benefits of the new bill, much of the OBBB consists of policies already in place that will continue. Some of the tax highlights are described below.
- Tax rates from the Tax Cuts and Jobs Act are essentially permanent now, with adjustments for inflation going forward on the tax brackets. This originated with President Trump’s original objective in the Tax Cuts and Jobs Act to reduce the number of tax brackets and widen them.
- The state and local income tax cap has been increased to $40,000 from the old $10,000 limit. This refers to taxpayers’ eligibility to take a deduction on their federal income tax return for the amounts paid in tax to states and municipalities. Many taxpayers remember the days of deducting property taxes for their homes, their vehicle license plates, in addition to their Michigan income taxes. These became obsolete for many of Michigan’s dentists when the cap on the deduction was $10,000, but many dentists are hitting that maximum just in state income tax.
It should be noted that once a taxpayer’s modified adjusted gross income exceeds $500,000, the deduction is reduced by 30% for each dollar in excess of this amount, up to a maximum of $30,000, which brings someone down to the prior limit of $10,000. Thus, if your MAGI is $600,000 or more you will not see a SALT increase on your tax return due to the deduction phaseout. Many practice owners work around a SALT cap of any amount by paying state taxes from their businesses. In order to do this, the business must be organized as a flow-through entity. There has been no change to this strategy as a result of OBBB. Consult your CPA for how this works in your situation.
- While there was some initial hope that the OBBB would eliminate tax on Social Security benefits, it turns out that was a little too much to expect. Instead, taxpayers aged 65 or older are now entitled to an additional $6,000 deduction. This is known as “The Senior Bonus Deduction” and is phased out at $150,000 for married taxpayers ($75,000 for single taxpayers). It will be in effect for tax years 2025 to 2028.
Planning opportunity — Seniors eligible for the $6,000 deduction may take this opportunity to accelerate Roth conversions or distributions from IRAs to reduce impending required minimum distributions that commence at age 73 to 75. If using this strategy, take great care to manage conversions or distributions so as to not raise your income so high that the deduction is lost. Taxpayers do not need to itemize to be able to claim the Senior Bonus Deduction.
- Similar to the thought that Social Security benefits would be exempt from tax under the new bill, so too did many believe that tip income would be exempt from tax. The OBBB created a deduction of up to $25,000 for qualified tips received by someone in an occupation that “customarily and regularly receives tips.” Taxpayers do not need to itemize to take the qualified tip deduction. Sadly, for the purposes of dental offices, we cannot reclass employee bonuses as tips due to this “occupation that customarily and regularly receives tips” provision.
- Not taxing overtime wages was another feature many thought the OBBB would bring with it. While overtime wages are not completely exempt from tax, there is no tax on overtime up to $12,500 single ($25,000 joint), with limits from modified adjusted gross income at $150,000 for single taxpayers ($300,000 for joint taxpayers). This is currently in place for tax years 2025 to 2028. Taxpayers do not need to itemize to take the deduction for overtime wages.
- There is also a new deduction for non-itemizing taxpayers who make charitable donations. Single taxpayers can receive up to a $1,000 deduction on donations starting in 2025 ($2,000 for joint filers).
- Another new deduction created by the OBBB is for interest on auto loans. Auto loan interest will be deductible up to $10,000 on vehicle debts incurred after Dec. 31, 2024, for personal use vehicles that must have had their final assembly in the United States. This is for years 2025 to 2028, with modified adjusted gross income phase-outs of $100,000 for those filing single ($200,000 for those filing jointly).
- The qualified business income deduction is now permanent, with the same deduction rate of 20%. The Tax Cuts and Jobs Act had reduced corporate tax rates (C-corps) from 35% to 21%. The purpose of the QBID was to give small businesses (not organized as C-corps) similar tax relief. This has had mixed consequences for dental practice owners, as personal service corporations are treated differently for the qualified business income deduction than other types of businesses.
- First-year bonus depreciation has been restored. This provides for the immediate, full depreciation deduction for 100% of qualified property acquired and placed in service on or after Jan. 19, 2025. Bonus depreciation does not require use of Sec. 179 election. Bonus depreciation can lead to a large tax savings, especially when used in conjunction with a cost segregation study on real property (practice buildings or other commercial real estate). Bonus depreciation is an automatic election, allowing business owners to use it, or elect out and save the depreciation expense for use in future years. This creates great opportunities for tax planning and strategy.
- Estate and lifetime gift tax exemptions for 2026 will be $15 million for single taxpayers ($30 million for joint taxpayers), with adjustments for inflation going forward.
- Many clean energy incentives expire in 2025. Electric vehicle credits will terminate after Sept. 30, 2025. Energy efficient home improvement credits and residential clean energy credits expire at the end of 2025.
“Trump accounts”
Beyond tax Policy, the OBBB also established “Trump Accounts,” investment accounts that can be established for young children born between Jan. 1, 2025, and Dec. 31, 2028. These accounts will be seeded with $1,000 from the federal government, with annual contribution limits of $5,000 thereafter. Deposited funds can be invested for growth and 50% of the balance will be available for withdrawal at age 18 for higher education or business start-up costs, or first home purchases. Wider uses will be available for individuals at age 30.
These accounts are expected to be available through a variety of financial institutions. However, given the freshness of the legislation, financial platforms will likely need time to adapt systems and develop infrastructure to support these accounts.
Fortunately, there are no income limitations or phaseouts applicable to these accounts.
Impact on student loans
Some of the more controversial elements of OBBB involve loans available for higher education — most notably, the $50,000 annual cap on borrowing for professional degrees, such as dental school. In addition to the annual cap, there is also a lifetime cap of $200,000 in professional school borrowing. These limits go into effect on July 1, 2026, for the 2026-27 school year. Those of us who serve the dental profession are left wondering how this will impact enrollment at both of Michigan’s dental schools, where costs far surpass the $200,000 aggregate limit.
The OBBB has not only changed how the future cost of higher education would be financed, but it also has changed existing student loan repayment programs and created another income-driven repayment plan for student loans, the “Repayment Assistance Plan.” The primary features of the RAP include the following:
- Payment amounts are on a graduated scale up to 10% of adjusted gross income. This is a different calculation than preceding programs that typically used “discretionary net income” as the driver. Discretionary net income is calculated by comparing income levels to the poverty line with consideration for family size.
- RAP stipulates forgiveness of unpaid balances after 30 years of required payments, instead of 20 to 25 years under older versions of similar plans.
- Unpaid interest is waived, so the loan balance doesn’t grow during repayment years.
The OBBB also eliminates the litigation-entangled SAVE program. Many recently graduated dentists have enrolled in the SAVE plan over the last few years and have found themselves in uncertain forbearance status until the litigation surrounding the plan settles. Borrowers who are currently on the SAVE program will need to migrate to income-based repayment no later than June of 2028, but more likely in mid-to-late 2026.
There was a lot of press coverage and buzz around the OBBB and what it was expected to contain, especially in its early stages. However, as readers digest this summary of the OBBB, they may find themselves surprised that some of the provisions they anticipated seemed to be diluted in the final version. The difference between expectations and reality is a good reminder that when it comes to legislation, deals must be made to secure necessary votes. The most notable example of this in the OBBB must be the carve out for Alaskan whaling captains. This feature of the OBBB raises the annual deduction limit for qualified whale-hunting expenses from $10,000 to $50,000; a deduction relevant for approximately 160 eligible whaling captains nationwide. This highly targeted carve-out helped secure Alaska Sen. Lisa Murkowski’s crucial swing vote to pass the OBBB.
Time will tell what the ultimate and long-term impact of the OBBB will be. As taxpayers, investors, and Americans, we are all used to the landscape changing and the need to adapt accordingly. This is a good reminder to meet regularly with your professional advisers to make sure your plan is evolving to take advantage of current available strategies.