Key OBBBA Tax Provisions Impacting Healthcare Organizations

With the One Big Beautiful Bill Act (OBBBA), recently signed into law,1 this legislation introduces sweeping tax changes, extends provisions of the Tax Cuts and Jobs Act of 2017 (TCJA), and enacts additional tax cuts.

While aiming to stimulate domestic economic growth broadly, its implications for healthcare organizations, both for-profit and tax-exempt institutions, are particularly significant.

Below, we will summarize some of the relevant tax provisions and explore how they may affect healthcare providers, systems, and tax-exempt institutions.

Bonus Depreciation: Expanded Opportunities for Capital Investment

Healthcare organizations often invest heavily in medical equipment, IT infrastructure, and facility upgrades. The OBBBA permanently extends 100% bonus depreciation for qualified property placed in service after January 19, 2025. This allows healthcare entities to immediately expense the full cost of eligible assets, helping improve cash flow and reduce taxable income.

For-profit impact: Hospitals, clinics, physician enterprises, and joint ventures can accelerate deductions for capital expenditures, such as imaging machines or surgical equipment.
Tax-exempt impact: While depreciation doesn’t directly reduce taxable income, it may affect unrelated business income (UBI) calculations and financial reporting.

In addition, nonresidential real property used in manufacturing or production, e.g., pharmaceutical compounding or medical device fabrication, may qualify for bonus depreciation through 2030.

Small Business Tax Pass-Through Entities

The OBBBA maintains the ability for pass-through entities (PTEs) to claim deductions for state and local income tax at the business level.

For-profit healthcare: Healthcare entities operating as PTEs will still be able to deduct state and local income taxes as they have been.
Tax-exempt healthcare: While this isn’t applicable to tax-exempt directly, this could be applied to joint ventures and other PTEs associated with health systems and academic medical centers.

Because these benefits were maintained, there is additional opportunity for healthcare organizations to explore these PTE deductions if they are not already doing so.

Business Interest Deduction: Enhanced Flexibility for Expansion

The OBBBA modifies the interest deduction under Internal Revenue Code (IRC) Section 163(j) by switching from an EBIT to an earnings before interest, taxes, depreciation, and amortization (EBITDA)-based cap. By taking depreciation and amortization into account in the limitation calculation, this change increases the allowable deduction for interest expense.

For-profit healthcare: Systems financing new facilities or acquisitions through debt may benefit from greater deductibility, possibly improving after-tax cash flow.
Tax-exempt healthcare: While not directly taxable, organizations with taxable subsidiaries or joint ventures may see improved financial structuring options.

SALT Deduction Cap: Limited Relief for High-Income Professionals

The OBBBA raises the state and local tax (SALT) deduction cap to $40,000 in 2025, with gradual increases through 2029 before reverting to $10,000.

For-profit executives and physicians: While not a business provision, high earners in healthcare may benefit from the temporary increase, especially in high-tax states.
Tax-exempt organizations: No direct impact but this may affect donor behavior or executive compensation planning.

Clean Energy Credits: Impacts on Sustainable Healthcare Facilities

The OBBBA repeals or limits many clean energy credits, including those for solar, wind, and energy-efficient buildings.

For-profit and nonprofit healthcare: Hospitals and other organizations planning green construction or retrofits should act quickly. Section 179D deductions for energy-efficient buildings will terminate for projects starting after June 30, 2026.
Procurement caution: Credits may be denied if vendors are linked to foreign entities of concern.

Compensation & Benefits: Tip & Overtime Deductions

The OBBBA introduces deductions for tips (up to $25,000) and overtime (up to $12,500) for eligible workers, with phaseouts for high earners.

For-profit healthcare: This may benefit lower-wage staff in tipped roles, e.g., food service in hospitals, or those working overtime.
Tax-exempt healthcare: Similar benefits apply, though payroll systems must be updated to reflect new W-2 reporting requirements.
Section 112020: Excise tax on excess compensation within tax-exempt organizations expands to all employees with more than $1 million in compensation. Previously, this was limited to only the top five highest paid covered employees. Excess compensation paid to licensed medical professionals for medical services performed continues to not be subject to the excise tax (for tax years beginning after December 31, 2025). As such, the impact of medical institutions will likely be minimal. However, due to the expansion of the covered employee definition, universities and other large 501(c)(3) organizations with large numbers of highly compensated individuals may fall more heavily under this tax regime.

Research & Experimental Expensing: A Boost for Innovation

The OBBBA reinstates immediate expensing of domestic research and experimental expenditures (REEs), reversing the TCJA’s amortization requirement.

For-profit healthcare: Organizations engaged in research and development (R&D), such as biotech firms or hospital research arms, can deduct domestic REEs in the year incurred, potentially improving their return on investment (ROI) on innovation.
Tax-exempt healthcare: Academic medical centers and nonprofit research institutions may benefit indirectly through grant structuring or partnerships with taxable entities.

Small healthcare businesses with less than $31 million in gross receipts can retroactively deduct REEs from 2022 onward, offering a potential refund opportunity.

Small healthcare businesses with less than $31 million in gross receipts for the prior three years can retroactively deduct REEs from 2022 onward, offering a potential refund opportunity. All businesses can deduct unamortized section 174 costs either in 2025 or split in half between 2025 and 2026.

How Forvis Mazars Can Help

Healthcare organizations should gauge how these tax provisions may impact their operational structure, cash flow, and strategic goals. For-profit entities and individuals may find new opportunities for tax savings and investment, while tax-exempt institutions should consider indirect impacts on UBI, partnerships, and donor behavior. Our dedicated healthcare tax team can provide in-depth industry knowledge, real-world insight, and forward-looking strategies that can help power your mission. If you have any questions or would like more information on tax provision changes resulting from the OBBBA, please reach out to a professional at Forvis Mazars.