2025 Year-End Tax Update: What Physicians Need to Know Before Filing

Every December, my Maui-based CPA sends me a one-page summary of what changed in tax law. No jargon avalanche. No hundred-slide deck. Just a simple rundown: here's what helps you, here's what hurts, and here's what you need to do before January.

I've always told myself to read her summary with my calendar open, because most of the value is in what you still have time to act on.

This year's tax law clocked in at over a thousand pages. But her advice? Still fits on a single sheet.

What follows is the physician-specific version of that guidance—adapted for the realities of your income, your practice structure, and your financial goals. You can read it in under five minutes and walk away with a punch list for your CPA conversation.

Let's start with the good news.

The "Winners": Changes That Can Help Physicians in 2025

What this actually means for physicians: fewer gimmicks, more attention to timing, documentation, and income control.

100% Depreciation Is Back

If you own a practice or have significant equipment needs, this one matters. Special depreciation has returned to 100%, with expanded Section 179 room. That means qualifying equipment, certain vehicles, and practice upgrades purchased and placed in service in 2025 can be fully expensed in the year of purchase—not spread out over years of depreciation schedules.

Planning an imaging upgrade? New procedure chairs? A practice vehicle? Talk to your CPA about timing these purchases before year-end.

Higher SALT Cap (With Fine Print)

The combined deduction limit for property taxes and state income taxes has jumped from $10,000 to $40,000. For physicians in high-tax states like California, New York, or New Jersey, this is real relief.

A caveat: if you're a dual-physician household with very high income, you may still bump against the cap—and entity-level strategies like PTET elections may still matter more than the personal deduction. This is a "check with your CPA" area, not a blanket win.

Car Loan Interest and Overtime/Tips

Two smaller changes that may help around the edges:

Personal car loan interest is now deductible up to $10,000. If you financed a vehicle recently, ask whether this applies to you.

There's also new relief for tip and overtime income—up to $25,000 in tips and $12,500 in overtime can be excluded or deducted. This won't move the needle for most W-2 physicians, but if you have a spouse or older child in a tip-heavy or overtime-eligible job, or if you run a side business with tipped employees, it's worth a look.

Senior Social Security Relief

If you're over 65 and your adjusted gross income falls under $150,000, you may qualify for a $6,000 reduction in taxable Social Security income. This is particularly relevant for semi-retired physicians easing into part-time work, or those who've structured their income to stay below certain thresholds.

Even if you're not there yet, this is a planning point for your transition years.

Top Rate Cap and Shifting Audit Focus

The top federal income tax rate is now capped at 35%, down from what would have been 39.6%. For high-earning physicians, that's a meaningful difference on every dollar above the top bracket threshold.

On the enforcement side, reduced IRS funding may mean fewer audits overall—but audit selection is becoming more targeted, not random. Clean records matter more, not less. If your documentation is solid, you can sleep easier. If it's not, you're a bigger target than before.

The Cash Flow Reminder

Here's the simple year-end rule of thumb:

• Defer income into 2026 where you can (especially if you're 1099, locums, or have practice revenue you can delay billing on).
• Accelerate deductions into 2025—equipment, continuing education, board fees, professional memberships, charitable contributions.

This is especially powerful for 1099 physicians and practice owners who have more control over when income hits their books.

The "Losers": Credits and Loopholes Going Away

Solar Credit Ends After December 31, 2025

If you've been on the fence about solar panels for your home or practice, the fence is about to disappear. The federal solar tax credit expires at year-end. To claim it, your system needs to be installed and operational by December 31—signing a contract alone isn't enough.

If solar is already in your plans, now is the time to push the timeline.

EV Credit on the Way Out

The electric vehicle tax credit is being phased out and will be fully repealed by September 30, 2035. For many high-earning physicians, income limits already made this credit hard to use. Going forward, it's simply not a planning centerpiece.

If you were counting on it for a near-term purchase, double-check eligibility before assuming it applies.

New 1% Excise Tax on Overseas Transfers

If you support family abroad or move money internationally through channels outside standard banking, there's a new 1% excise tax on those transfers.

The simple advice: run international transfers through documented, normal banking rails. If you've been using alternative channels, talk to your CPA about restructuring how you send money overseas.

Year-End Checklist for Busy Physicians

You don't need to master the whole law. You just need to act on a few key items before December 31.

If you're 1099 or own a practice:

• Talk to your CPA about 100% depreciation for any 2025 equipment or vehicle purchases.
• Explore whether you can defer late-year income into early 2026.
• Reconcile your gross income with your bank deposits and books. This is the item that causes the most back-and-forth with CPAs every March—and the easiest to prevent with thirty minutes of attention now.

If you're W-2 employed:

• Double-check your withholdings, HSA contributions, and any last-minute deductible expenses.
• If your spouse or kids have tip or overtime income, ask whether the new exclusions apply.

If you're over 65 or nearing retirement:

• Ask whether you qualify for the $6,000 Social Security reduction.
• Review retirement distributions, Social Security timing, and any solar or EV plans while you're still in higher brackets.

For everyone:

• Make sure your bank statements, 1099s, and bookkeeping agree—especially for any rental, side gig, or self-employment income.
• If you have state-specific taxes like Hawaii's General Excise Tax (or equivalents elsewhere), don't forget those filings.
• Put a 30-minute call or email on the calendar with your tax pro before December 31. Not in March. Now.

A Calm Closing Note

Taxes are stressful. A thousand-page law sounds overwhelming. But you don't need to master all of it—you just need to know your few key moves and have a good CPA in your corner.

Think of this as part of your financial wellness routine. Not a once-a-year panic, but a steady rhythm of staying informed and taking small, smart actions.

That long-view perspective is something I've come to value—not just in tax planning, but in how I approach financial decisions overall. Calm, clear, one step at a time.

Here's to finishing 2025 well—and walking into tax season with confidence instead of dread.