4 Key OBBBA Tax Changes for Healthcare Businesses

The OBBBA, enacted on July 4, is packed with tax changes that deliver long-awaited relief and new opportunities – especially for healthcare for-profit businesses navigating complex financial, operational, and technological demands.

Following are four key tax provisions that could meaningfully affect for-profit healthcare organizations.

1. 100% bonus depreciation is back

The OBBBA revives 100% bonus depreciation for qualifying property acquired after Jan. 19, 2025. This allows for full expensing in the year the asset is placed in service – rather than spreading deductions over several years.

Examples of assets that might be eligible for bonus depreciation include:

• Medical and surgical equipment
• Technology infrastructure (such as servers and hardware)
• Certain leasehold improvements and facility enhancements

Crowe observation

Bonus depreciation can help healthcare businesses planning capital investments – such as expanding outpatient facilities or upgrading diagnostic equipment – to reduce taxable income immediately and preserve cash flow.

OBBBA also includes a special depreciation provision for qualified production property used in manufacturing or refining tangible personal property, providing expanded opportunities for healthcare-adjacent businesses.

2. Section 179

Section 179 provides an alternative expensing method, which is especially beneficial for smaller-ticket items purchased throughout the year.

Key updates:

• Deduction limit increased to $2.5 million
• Phase-out threshold raised to $4 million
• Both figures are indexed for inflation and apply to tax years beginning after Dec. 31, 2024

From a strategic planning perspective, note that Section 179 can be used only to the extent the taxpayer has taxable income. If an organization operates at a loss or low profitability, the deduction may be limited in the current year, though excess can be carried forward.

Examples of assets that might be eligible for the deduction include:

• Medical exam tables, X-ray machines
• Computers and software systems
• Dental chairs and lab equipment

In some cases, it might be more beneficial to elect Section 179 instead of bonus depreciation, especially for tax planning purposes. One key reason is that many states conform to federal Section 179 expensing but do not conform to federal bonus depreciation rules. By using Section 179 in those states, healthcare businesses can take advantage of immediate expensing at both the federal and state level, avoiding the timing differences and deferred tax liabilities that bonus depreciation can create at the state level.

3. Business interest expense

Under prior tax law, for tax years beginning after Dec. 31, 2021, the Section 163(j) business interest deduction limitation was based on earnings before interest and taxes (EBIT) for most taxpayers – a restrictive formula that excluded depreciation and amortization. Effective for tax years beginning after Dec. 31, 2024, OBBBA restores the use of earnings before interest, taxes, depreciation, and amortization (EBITDA) in computing the limitation, allowing more interest to be deducted.

Leveraged structures are common in healthcare, particularly in private equity roll-ups, surgical centers, and hospital businesses with significant debt from real estate or acquisitions. A return to the use of EBITDA to determine the interest deduction limitation can increase a business’s interest expense deduction and improve after-tax cash flow.

Additionally, for tax years beginning after Dec. 31, 2025, elective capitalization of interest expense to avoid Section 163(j) limits no longer will be allowed. Interest capitalized under Section 263A (self-constructed property) or 263(g) (investment debt) are excluded from the limitation.

4. Full expensing for domestic research and experimental (R&E) expenses

The OBBBA enacted a new Section 174A to permanently restore immediate expensing of domestic R&E expenses beginning with tax years after Dec. 31, 2024.

Crowe observation

This change marks a significant shift for healthcare organizations, opening new opportunities to accelerate investment in technology, innovation, and patient-centered solutions.

Foreign R&E expenses still are required to be capitalized and amortized for 15 years under Section 174.

Examples of R&E expenditures could include:

• Clinical process development and improvements
• Diagnostic algorithm design to improve patient outcomes
• Software development, which remains a qualifying R&E expenditure
• Patient portal or electronic healthcare records enhancements 

Taxpayers can continue capitalizing domestic R&E expenses by electing to capitalize and amortize them over at least 60 months or by electing under Section 59(e) to amortize them over 10 years. A special transition rule allows taxpayers to choose whether to deduct any remaining unamortized pre-2025 domestic R&E costs fully in their first tax year beginning after Dec. 31, 2024, or over two years (that is, either as a single deduction in 2025 or ratably over 2025 and 2026), any remaining unamortized domestic R&E expenditures. Small businesses (with average annual gross receipts under $31 million) can apply the new rules under Section 174A retroactively to 2022-2024 via amending returns or through an accounting method change for the 2024 tax year.

Looking ahead

The OBBBA gives for-profit healthcare companies tools to accelerate deductions, reduce taxable income, and support growth. However, these benefits require proactive tax planning, including: 

• Reviewing planned capital expenditures for depreciation opportunities
• Evaluating debt structure and future interest expense
• Revisiting R&E amortization schedules and exploring retroactive or prospective expensing opportunities

Companies should consult their tax advisers to help evaluate OBBBA opportunities, model tax impact, and implement appropriate elections and documentation.