A Therapist’s Guide to Tax Season

One of the first steps surviving tax season as a private practice owner is understanding deductions and which ones apply to your business. If you’re new to running your own therapy practice, there may be certain tax deductions that you are not familiar with that can save you hundreds or even thousands of dollars on your tax return. 

To help ease some of the stress that comes with tax season, we’ve collected a list of common business expenses for self-employed therapists. Before attempting to claim any new deductible expenses on your tax return, make sure to consult with your accountant.

What are tax deductions

Tax deductions refer to offsetting the business expenses you pay to maintain your own practice. They lower the amount of income you are taxed on, therefore lowering the amount of money you owe at year-end. 

Valuable tax deductions for therapists

1. Home office expenses

Rent and utilities for a therapist’s office are tax deductible. If your home is your primary place of business, you can claim the cost of the space you use for work as a deductible expense.

2. Legal and professional fees

As a private practice therapist, any legal and professional fees related to your business are deductible. These include payments to accountants, bookkeepers, tax preparers, lawyers, and business consultants. 

3. Bank charges and fees

Charges like interest, checking account fees, and credit card processing fees are tax deductible. It’s a good rule of thumb to have separate bank accounts and credit card specifically for managing your business expenses. 

4. Business registration and license fees

This is especially important if you opened your private practice this year. You can deduct most of your start-up costs, including your business registration and licenses.

5. Office expenses

Any office costs or supplies you bought for your private practice can be a tax deduction.This includes pens, printers, paper, stamps, etc.

6. Marketing and advertising

Money invested in trying to grow your business can be a deductible expense. Advertising expenses include Google ads, print materials, radio/podcast mentions, and paid promotions on social media.

7. Professional membership fees

The cost of membership in any professional organization for therapists or any business association that might benefit your practice is fully tax deductible. This includes membership in your local Chamber of Commerce.

8. Therapeutic aids

The cost of any item you use to help you work in-session with clients is tax deductible, including cards, workbooks, art therapy supplies, games, puzzles, fidget or calming toys, and stuffed animals.

9. Continuing education

The cost of continuing education, as long as it helps you build upon your current practice as a therapist, can be deducted. This includes tuition at a post-secondary institution, the cost of courses online or in-person, and workshops.

10. Travel

Travel expenses to and from your office are not deductible, but trips to the bank, to pick up supplies, to meet a client at another location, or the costs of travel to a professional conference are deductible.

What’s NOT deductible

Keep in mind that these common expenses are not allowed tax deductions: 1. Discounts you give insurance companies or clients from your usual fees. 2. Any ‘write offs’ of patient balances that remain unpaid, because you’re most likely following a Cash Basis Accounting Method. 

Keeping records for your deductible expenses

It’s important to keep receipts for any expenses you list as a tax deduction. If you’re ever audited the IRS will require proof that every expense you claimed on your tax return was legitimate. Keep your receipts organized by year and include notes specifying what the expense was for and how it applied to your business.

*This blog is intended to support mental health therapists during tax season and should not be taken as advice from an accounting or financial professional.

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