5 Tax Changes in the One Big Beautiful Bill Act Impacting Optometry Practice Owners

The recently passed One Big Beautiful Bill Act (OBBBA)¹ brings important changes to the tax and student loan landscape for private practice optometrists. Let’s dive into five tax provisions that directly impact independent practice owners.

Understanding these changes now gives you time to plan strategically with your tax advisor before year-end.

1. LONG-TERM STABILITY FOR INDIVIDUAL TAX RATES AND THE STANDARD DEDUCTION

In welcome news, the law extends currently lower tax brackets indefinitely (until Congress changes them), rather than letting them expire after this year.

The standard deduction was originally slated to drop in 2026, but the currently higher amounts have now been made “permanent.” For 2025, the deduction is also increased to $31,500 for joint filers and $15,750 for single filers.

Of course, “permanent” in tax law just means it will remain until Congress decides otherwise. For now, we’ll enjoy the stability for longer-term planning.

Effective: 2025 tax year and beyond (until Congress says otherwise).

2. QUALIFIED BUSINESS INCOME DEDUCTION MADE PERMANENT

The 20% Qualified Business Income (QBI) deduction was set to expire after 2025, which would have effectively increased the tax cost of profit flowing through your S‑corporation, partnership or sole proprietorship.

The OBBBA makes the deduction permanent, with a small enhancement. Because optometry is generally classified as a specified service trade or business (SSTB), your deduction gradually phases out as your taxable income increases. Here’s where these phaseout ranges stand for the 2025 tax year:

Starting in 2026, the phaseout ranges widen, giving higher‑earning optometrists a bit more room before it’s eliminated.

Those close to the phaseouts will consider planning opportunities around reasonable S‑corporation salary levels, 401(k) and cash balance plan contributions and timing of deductions to keep taxable income within or under the phaseout range.

Effective: 2026 tax year and beyond.

3. HIGHER STATE AND LOCAL TAX DEDUCTION—WITH STRINGS ATTACHED

Each taxpayer gets one of two deductions: a standard deduction or a list of itemized deductions, whichever is higher. On the list of itemized deductions are state and local taxes (SALT).

Since 2018, Congress capped SALT deductions at $10,000, significantly impacting practice owners in high-tax states like California or New York.

Fortunately, the law temporarily increases the cap to $40,000 from 2025 through 2029. In 2030, it drops back to $10,000.

There’s a catch: Once your “modified” adjusted gross income (MAGI)² hits $500,000, the extra SALT deduction phases down 30% for every additional dollar. It lands back at $10,000 once you hit $600,000. For those married filing separately—sometimes done for student loans—all deduction limits are reduced by half.

Both the cap and the income limits increase 1% per year starting in 2026.

For higher-earning practice owners, that $500,000 to $600,000 range of income starts to get expensive. Because of the 30% phase down, each additional dollar of income in that range loses $0.30 of deduction. In the 35% federal tax bracket, the effective tax rate on those dollars is 45.5%³.

Other deductions phasing out at that income level—like the QBI deduction—can increase the effective tax rate even more.

As an example of how these interact, take a married couple with no kids who own a practice together in 2025.

Each receives $126,500 in taxable wages after 401(k) contributions. The taxable profit of the practice is $247,000, making their AGI exactly $500,000. They also have exactly $40,000 in state and local taxes. For simplicity, assume no other deductions or income. What happens if the practice sees an extra $20,000 in profit?

In this simplified example, the extra $20,000 of income had a 61% effective tax rate, due to the declining SALT and QBI deductions. This becomes an important planning range for optometrists close to it.

Effective: 2025 to 2029 tax years.

4. THE RETURN OF 100% BONUS DEPRECIATION

Bonus depreciation lets you fully expense the cost of certain new and used assets in the current tax year, rather than depreciating them over time.

The 2017 Tax Cuts and Jobs Act allowed 100% bonus depreciation. After 2022, the percentage of the cost you could fully expense decreased 20% each year. The OBBBA extended 100% bonus depreciation indefinitely for assets bought and put to use after Jan. 19, 2025.

The biggest planning opportunities may come for those buying rental real estate. By default, rental real estate depreciates over 27.5 years for residential and 39 years for commercial. When it makes sense, you may consider a cost segregation study on the building—breaking it down to smaller components with shorter depreciation schedules that qualify for bonus depreciation.

Buying the commercial real estate of your practice? It may be possible to group it with your business for tax purposes and use its tax losses against your practice (and other) income. Generally, outside of specific exceptions, real estate losses can only be used to offset other passive incomes.

Depending on the situation, this could be a useful planning tool.

Effective: For “qualified” property purchased and put to use after Jan. 19, 2025.

5. PASS-THROUGH ENTITY TAX CREDIT WORKAROUND SURVIVES

In response to the SALT cap, states adopted a workaround called Pass‑Through Entity Taxes (PTET). The rules vary by state. S‑corporations and partnerships generally pay owners’ state income taxes as deductible business expenses, and owners receive a corresponding credit on their individual state tax return. The IRS eventually approved this approach.

Early drafts threatened to scrap it, but the final bill didn’t touch it. You can continue to review PTET each year with your tax professionals and follow the rules to ensure timely elections and estimated payments.

Effective: Unchanged federally for 2026 tax year and beyond, but states can change.

STRATEGIC FINANCIAL PLANNING IS KEY

The OBBBA extends numerous expiring tax provisions and adds a few more deductions and phase-outs to consider. Due to its scope, we haven’t covered all the provisions here, but there are other resources to explore the bill in full. You can find a one-page summary of key tax changes here.

The key is proactively working with your tax and financial advisors, reviewing and projecting your tax situation and acting on the portions of the law that impact your finances most. Then, you and your advisory team can find the key tax planning levers to pull for the 2025 tax year and beyond.

Happy planning!

1. Find the full text of the final law here.
2. There are several definitions of “modified” AGI. For the SALT deduction, “MAGI” = AGI + any amount excluded from income related to Foreign Earned Income Exclusions or while living in U.S. territories like Puerto Rico and Guam. For most ODs here, MAGI = AGI.
3. $1.30 x 35% = $0.455. Divided by the $1 of extra income, and that’s 45.5% effective tax rate.

For more on practice finances, read “An Independent Path to Recurring Revenue” here.

Read more Practice Management stories on Independent Strong here.