2026 brings meaningful tax, payroll, Medicare, and compliance changes for independent medical practices. Key updates include permanent reinstatement of 100% bonus depreciation, expanded Section 179 limits, new payroll and retirement reporting requirements, evolving Medicare reimbursement rules, and heightened quality program expectations.

At the federal level, legislation such as the One Big Beautiful Bill Act (OBBBA) and HR5371, along with the 2026 Medicare Physician Fee Schedule (PFS) Final Rule, introduce new payment structures, telehealth timelines, efficiency adjustments, and quality reporting changes that vary by specialty. Practices that act early by aligning tax planning, payroll systems, Medicare participation, and quality strategy will be better positioned to protect margins, remain compliant, and plan confidently for the years ahead.

Legislative & Regulatory Context Shaping 2026

Several major legislative and regulatory actions form the foundation for the 2026 changes:

One Big Beautiful Bill Act (OBBBA)

Signed July 4, 2025, the OBBBA introduced permanent tax provisions, temporary Medicare payment increases, changes to HSAs and HDHPs, Medicaid eligibility adjustments, and medical education funding caps.

HR5371 – Continuing Appropriations & Extensions Act

Signed November 12, 2025, this act extended key telehealth flexibilities originally enacted during the COVID-19 public health emergency through January 30, 2026.

CMS 2026 Medicare Physician Fee Schedule (PFS) Final Rule

Released October 31, 2025, this rule established new conversion factors, reimbursement adjustments, quality program updates, and specialty-specific impacts effective January 1, 2026.

Understanding how these pieces intersect is critical, as many tax, payroll, and reimbursement changes take effect simultaneously.

Tax & Accounting Changes for Medical Practices in 2026

Bonus Depreciation Is Permanently Restored

Beginning January 19, 2025, 100% bonus depreciation is permanently reinstated for qualifying property placed into service. For medical practices, this directly impacts depreciable assets such as:

• Medical equipment and imaging purchases
• Technology and EHR investments
• Office buildouts and facility improvements

This change restores flexibility for capital planning and removes the uncertainty of phased-down depreciation schedules.

Section 179 Expensing Limits Increase

• Expensing limit increased to $2.5 million
• Phaseout threshold increased to $4 million
• Applies to property placed in service after December 31, 2024

For practices planning expansions or modernization, Section 179 and bonus depreciation can be strategically combined, but only with proper timing and entity planning.

Payroll, Retirement, & Compensation Changes

Retirement Plan Updates Affect Physician Owners

2026 contribution limits increase across multiple plan types, with notable changes for highly compensated physicians:

• Enhanced catch-up contributions for ages 60–63 (if allowed by the plan)
• Mandatory Roth catch-up contributions beginning in 2026 for employees age 50+ earning more than $150,000 in prior-year wages

These changes may require updates to plan design, deferral strategies, and provider education.

“No Tax on Overtime” Comes with New Compliance Requirements

A new temporary deduction eliminates federal income tax on qualified overtime pay, but adds complexity:

• Overtime must be tracked separately under FLSA rules
• Employers must report overtime pay on Forms W-2 and 1099 beginning in 2026
• IRS guidance and withholding updates are expected

Practices should evaluate whether payroll systems and timekeeping processes are ready for these changes.

Medicare & CMS Changes Taking Effect in 2026

Medicare Payment & Reimbursement Updates

The CMS 2026 PFS Final Rule introduces:

• Two conversion factors for both Physician services and Anesthesia services (Qualified Participant vs. non-QP)
• A -2.5% efficiency adjustment to work RVUs
• Reduced facility practice expense RVUs (reduced to half to what was allocated to non-facilities)
• Expanded care management and behavioral health integration codes
• Permanent removal of certain telehealth frequency limitations

Telehealth Timelines to Watch

• Many telehealth flexibilities are extended only through January 30, 2026
• Practices should plan now for potential expiration or further legislative action

Failure to prepare could disrupt scheduling, provider workflows, and patient access.

Specialty-Specific Impacts Under CMS PFS 2026

CMS projections show varying reimbursement impacts by specialty, including notable reductions for:

• Dermatology
• Ophthalmology
• Otolaryngology
• Rheumatology
• Hematology/Oncology

Practices should evaluate how these changes affect service mix, staffing models, and compensation formulas.

Quality Program & Compliance Updates

Quality programs continue to evolve under CMS, with key updates including:

• New and revised MIPS Value Pathways (MVPs)
• Changes to ACO attribution and participation requirements
• Updated terminology (e.g., “Population Adjustment” and “Upstream Drivers”)
• Mandatory use of updated SAFER cybersecurity assessments

These changes reinforce the importance of aligning clinical operations, technology, and compliance strategy.

Action Steps & Compliance Checklist for Medical Practices

To prepare for 2026, practices should consider:

Tax & Accounting

• Review capital investment plans under new depreciation rules
• Model entity-level tax impact of permanent expensing provisions

Payroll & HR

• Evaluate payroll systems for overtime tracking and reporting
• Review retirement plan design and provider deferral strategies

Medicare & Reimbursement

• Assess specialty-specific CMS reimbursement impacts
• Update providers and schedulers on telehealth timelines

Quality & Compliance

• Review participation in MIPS, ACOs, and other quality programs
• Complete and document required SAFER assessments
• Strengthen year-end compliance processes for W-2s and 1099s
  
  

Navigate Regulatory Change with Lutz

Lutz works with independent medical practices to deliver integrated business solutions tailored to the healthcare industry. Our experts help you interpret regulatory changes, assess financial impact, and implement strategies that support compliance while positioning your practice for long-term sustainability.

If you’re ready to better understand how upcoming changes may affect your practice or want guidance in building a proactive plan, Lutz is here to help. Contact us to get started or watch our webinar recording for more information.