You already have a waiting room to staff, a schedule to juggle, and at least one patient who always shows up late. Staying up-to-date on tax law is not on your list, so we did it for you and pulled out the bits that actually matter if you own a dental practice in 2025.
One of the big wins for dental practice owners with the One Big Beautiful Bill Act of 2025 (OBBBA) is that the Qualified Business Income or QBI deduction for dentists, which was originally due to expire in 2025, is now permanent.
You can treat it as a long-term tool when thinking about compensation, retirement savings and equipment buys.
Why the 20% QBI Deduction Matters for Dentists
The QBI deduction lets owners of sole proprietorships, partnerships, and S corporations deduct up to 20% of qualifying business income on their personal return. That means if your practice earns, say, $180,000 in net income, you could deduct $36,000 of that before calculating your personal tax bill.
For a small or midsize dental practice, that often translates into real cash flow. Less tax paid today and more money to invest in staff, equipment, or retirement.
Phase Outs for Specified Service Trade or Business (SSTB)
Most dental practices fall into the Specified Service Trade or Business (SSTB) category because they are health service providers. That matters because SSTBs face a phase out of the QBI benefit as taxable income rises.
For 2025, the thresholds look like this:
- Single: Full deduction if taxable income ≤ $197,300. Phase-out range is $197,300–$272,300. No deduction above $272,300.
- Married filing jointly: Full deduction if taxable income ≤ $394,600. Phase-out range is $394,600–$544,600. No deduction above $544,600.
If your taxable income is below the lower threshold, you get the deduction like anyone else. Within the band, the deduction phases down. Above the upper band, the clinical practice QBI deduction is eliminated.
There’s a catch, though.
Don’t assume every dollar you earn from practice operations is SSTB income. Non-clinical activities such as selling dental supplies, owning a lab that manufactures devices, or certain passive investments can be separate sources of QBI, but watch out for IRS aggregation rules.
- De minimis rule: if a business with ≤ $25M receipts has ≥ 10% SSTB receipts (≥ 5% if > $25M), the whole thing is treated as an SSTB.
- 80%/50% rule: a commonly owned (>50%) entity that provides ≥ 80% of its property/services to an SSTB is treated as part of the SSTB.
That’s why you’ll want a specialized dental accountant to help determine whether any non-clinical activity really qualifies as a separate QBI.
How to calculate the QBI deduction for your dental practice
You should calculate QBI separately for each trade or business you run. If your taxable income is below the threshold you generally take 20% of QBI or taxable income minus net capital gains, whichever is smaller.
Here’s an example to illustrate what we mean:
Qualifying Business Income (QBI) = $120,000
Taxable income before QBI deduction = $150,000
20% of QBI = 0.20 × 120,000 = 24,000
20% of taxable income = 0.20 × 150,000 = 30,000
Allowed QBI deduction = the smaller of the two = $24,000.
Things get a little more calculated for high income earners. Once you’re in the SSTB income band, wage and property rules come into play.
In simple terms, the tax code gives you two alternative caps and you must use the larger one.
- Option A is simply half of the W-2 wages your practice paid.
- Option B is a mix of wages and capital: it is 25% of your W-2 wages plus 2.5% of the original cost of the qualifying property you own. Qualifying property means things like dental chairs, imaging equipment, cabinetry and other clinic fixtures at their purchase cost, not their current depreciated value.
Here’s a quick example:
Suppose you file single and your taxable income is $300,000, which is above the single upper limit of $272,300. Your practice had a QBI of $200,000, you paid $60,000 in W-2 wages, and the qualifying equipment you bought this year had an unadjusted basis immediately after acquisition (UBIA) of $400,000.
Compute the two options:
Option A: 50% of W-2 wages
0.50 × $60,000 = $30,000.
Option B: 25% of W-2 wages + 2.5% of UBIA
0.25 × $60,000 + 0.025 × $400,000 = $25,000.
Take the greater of the two: $30,000.
So even though 20% of your QBI would be 0.20 × $200,000 = $40,000, your allowed deduction will be capped at $30,000 because the wages and property test limits you.
In short, paying more W-2 wages or buying more qualifying property can raise that cap and let you claim a larger QBI deduction.
How to Maximize Your QBI Deductions
Here are some other tax breaks in 2025 that could help lower your overall taxable income and keep you within the lower income thresholds of the SSTB phase band.
Section 179 and Bonus Depreciation
Buying equipment and making improvements can lower your taxable income in the year you buy them, if you use Section 179 or bonus depreciation.
In 2025, those rules are generous again, allowing you to write off equipment, software, and building upgrades in the same year you buy them. Hence, timing a big purchase can drop your taxable income and help you avoid the SSTB phase band.
Rental real estate
If you own a rental property and run it like a business, that rental income can count toward your QBI. The IRS created a safe harbor rule that makes it easier to prove a rental is a business, it mainly involves keeping certain records and showing you spend time managing the property.
Retirement Savings
Putting money into a retirement plan lowers your taxable income right away. For smaller practices, a Solo 401(k) or SEP-IRA lets you shelter a decent chunk of income. For higher earners, a defined benefit plan can allow much larger contributions.
Pass-Through Entities Tax (PTET) at State Level
Some states let pass-through entities pay state tax at the entity level using a pass-through entities tax (PTET) election and then give owners a credit.
That can change the federal and state tax interaction and sometimes make sense if you live in a high tax state.
We help dental practices maximize their QBI deductions
We work with dental practice owners nationwide and see the same patterns. The QBI deduction 2025 can be a meaningful lever, but the rules are detail-oriented and your outcome depends on your unique business setup.
Book a quick strategy call with Core Advisors and we will walk through your practice numbers and produce an action list you can implement this tax year.
