Tax Deductions for Therapists

Are you preparing for your Business Taxes?

As a private practice counselor, the idea of tax season can bring up a lot of feelings. One of which includes discomfort and guilt especially when you don’t have a degree in business. Just like with any other facet of life, financial growth is a learning process. One of the first areas to be financially profitable as a mental health private practice owner is understanding tax deductions.

What are tax deductions for therapists?

When you take a deduction on your tax return you are “writing off” the costs that you have already paid. You subtracted these costs from your income for the year and are taxed on the remainder. Tax deductions lower the amount of income you are taxed on, therefore lowering the amount of money you’ll owe for the end of the year. There are a variety of common business expenses you can take deductions for.

To be clear, a tax deduction does not mean FREE! Essentially, you’re telling the IRS, “I made X amount this year, but I spent Y amount on the upkeep of my business.” Subtract Y from X, and you pay income tax on what is left.

Tax Terms: Write-off, tax deduction and even deductible are all terms used to mean the same thing in the tax world!

1. Advertising and marketing: Online profiles like Psychology Today, business cards, website or physical marketing material like brochures.
2. Association and membership fees: Including ACA, NCC and COAMFT
3. Bank charges and fees: Bank and credit card charges, annual fees, service fees, transfer fees and overdraft fees
4. Business meals: Any meal purchased related to your business, such as a lunch consultation meeting with a colleague or marketing coffee and pastries at doctors office
5. Continuing education: Yes, a course on somatic therapy is a tax write off as well as professional publications, books about counseling for your office, and transportation expenses to and from any class (yes, this includes plane tickets. Anyone thinking of a destination continued education course now?)
6. Office expenses and supplies: Your home office included. Pens, scissors, printer ink, postage, cleaning supplies and furniture
7. Professional Liability and Malpractice insurance
8. Health Insurance: Your personal health insurance for you and your family.
9. Legal and professional fees: Including your accountant, bookkeeper, tax preparer, lawyer, and SUPERVISION.
10. Business Registration & Licensure Fees: This is particularly important in your first year as you are able to write off a lot of the startup business costs.
11. Office rent and utilities: Your office rent, phone, and electricity can all be tax deductible. This can get tricky with home offices, so be sure to ask your tax preparer how best to approach this write off.
12. Personal psychotherapy: Are you seeing your own Counselor? Working with another mental health practitioner can aid in professional development and give you additional insight into your work as a counselor, thus improving your business in the long run.
13. Software services: Email service, EHR system, Payment collecting fees, Video conferencing and E-signature services are all examples.
14. Taxes: Payroll taxes, sales tax, and excise taxes can also be written off
15. Travel expenses: Travel can be a tax deduction if the trip or event was for business purposes. Including: airfare, car rental, hotel fees or travel meals.

Additional Takeaways

• Keep receipts for all expenses for your business. Your Accountant and Tax Prepare may need to see them and if you are audited by the IRS you will need them!
• Keep business and personal expenses separate (if you are an PLLC you are required to have a separate bank account). This will make it easier to find your deductions.
• Discuss all your tax deductions and questions with your Accountant/Tax Preparer

Taxes don’t need to be a big, scary thing! They also don’t need to have a massive impact on your mental health!