2017 Tax Reform and Its Effects on Healthcare

Over the past decade, the Healthcare Industry has been accustom to being center stage in political debates, but while medical providers and facilities did not have a prominent role in the latest political drama, the far reaching effects of the Tax Cuts and Jobs Act of 2017 (the “Act”), will impact almost everyone delivering healthcare goods and services. In addition to the reduction of personal tax rates, the following provisions will likely be most applicable to Healthcare providers: Reduced Business Tax Rates The tax rate for businesses taxed as corporations was reduced from 35% to 21%, and entities taxed as a partnership, S corporation, or sole proprietorship may now be entitled to a Pass-Through Entities Deduction of 20% of domestic “qualified business income.” The Pass-Through Entity Deduction, however, is complicated and has significant limitations. For example, select services entities, such as physician practices, have low upper limits for the availability of the deduction ($415,000 for married taxpayers and $207,500 for single taxpayers). As a result, this deduction may benefit only a limited number of healthcare providers. Action Steps There has been significant speculation as to whether there will be (or should be) a rush for S-Corps to revoke their designation, or for LLCs (PLC’s) to elect a C-Corp tax status to take advantage of the reduced corporate tax rate. While some for businesses (such as capital intensive high growth...

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