A Complete Breakdown of Tax Deductions & Tips Every Therapist Should Know
For physical and behavioral therapists, tax season is a mixed bag. It can be stressful, especially for small business owners who aren’t entirely sure how to manage the process. But here’s the thing: Tax deductions for therapists can be impactful and well worth it, allowing you to reinvest money back into your practice.
With the right recordkeeping habits in place, you can maximize your deductions and reinvest in your practice with confidence. So, let’s explore how to put more money back into your pocket this tax season.
Tax Write-Offs: Like Treatment Notes, but for Your Wallet
First, you can’t expect many tax benefits without accurately recording your expenses. Think about it this way: You’re already well-versed in meticulous notetaking. Why not apply the same discipline to your finances? Just like clinical notes help you provide better care, keeping tabs on your expenses improves your financial health.
But we can’t stress this enough: Keep your personal and business finances entirely separate. Opening a dedicated business credit card and business checking or savings account will help you keep track of expenses while offering additional layers of documentation for audit-proofing your finances.
Once you’ve secured separate accounts, make a habit of maintaining your records. To do so, keep all your receipts and document each cost. That way, if you’re audited by the IRS, these records will be your safety net. Without them, you risk facing fines or penalties.
To make it easier, consider using financial recordkeeping tools (i.e., QuickBooks, FreshBooks, or TurboTax for business owners). They categorize expenses, upload receipts, and even estimate taxes, reducing errors and simplifying your taxes. They can also generate reports so you can see exactly what you’ve spent. Likewise, don’t overlook your practice management software; it can be an additional resource for managing costs.
If your house is in order, it’s time to decide between taking the standard deduction or itemizing your expenses. It’s a choice that could significantly impact your tax savings.
To Itemize or Not to Itemize?
If you’re a therapist running a small business, you’ll face a decision each tax season: itemize your personal deductions or take the standard deduction. Personal deductions are things like mortgage interest and medical expenses, listed on Schedule A. Business expenses, like office supplies or professional development costs, go on Schedule C.
These are two separate things. Opting for the standard personal deduction doesn’t lock you out from claiming business expenses on Schedule C. You can do both, so choose the approach that maximizes your tax savings.
Tips to Decide Between Standard and Itemized Deductions
- Assess your eligible expenses. If they exceed the standard deduction limit, consider itemizing for greater tax benefits.
- Maintain accurate records. Remember, itemizing requires detailed recordkeeping and takes extra time. If you’re already maintaining accurate records, the extra effort to itemize could pay off.
- Evaluate the types of deductions most relevant to your practice. For therapists, business-related expenses like office furniture and staff training often make itemizing worthwhile.
- When unsure, consult a tax professional. Their guidance can ensure you make the most of your deductions.
By understanding your options and keeping diligent records, you’re well on your way to maximizing your tax savings this season.
21 Tax Write-Offs & Eligible Business Expenses for Therapists
While your deductions may not be as large as some healthcare sectors like surgery centers or medical equipment suppliers, they can still make a positive financial impact on your practice. Here’s what to consider:
1. Office Supplies
Even the smallest purchase counts when running a private practice. Your everyday office essentials offer dual benefits: They keep your office running smoothly and lighten your tax load. Here are a few items you can deduct:
- Pens, pencils, and markers
- Notebooks and legal pads
- Printer paper and ink
In a world increasingly reliant on digital tools, quality technology is critical for your practice. It streamlines your operations, enhances the client experience, and — importantly — it’s tax-deductible. Write off these tech essentials you use every day:
- Laptops and desktops
- Software subscriptions (like practice management software and video conferencing tools)
In a profession where the right tools can make all the difference, it’s reassuring to know that your investments in quality equipment can also yield tax advantages. Here are some examples of the integral tools you can deduct:
3. Workspace Furniture & Treatment Equipment
- Ergonomic chairs
- Office desks
- Lamps and lighting fixtures
- Sensory toys
- Exercise and rehabilitation equipment
4. Rent or Mortgage
Whether you’re leasing a commercial space or using a dedicated home office, rent and mortgage costs can offer tax relief. Make sure to consult an accountant to meet IRS requirements for home office deductions, such as exclusive business use.
Electricity, water, and internet—you definitely can’t practice without these essentials, so feel free to deduct them, too. And if you run your office from home, you can still claim partial deductions on these utilities, based on the percentage of space used for work.
6. Professional and Legal Fees
Malpractice insurance and business registration fees are significant costs you can’t ignore. Fortunately, these expenses are fully deductible, making it less burdensome to maintain compliance and protect your practice. Plus, knowing you can reclaim some of these expenses come tax time adds a layer of financial security and peace of mind.
7. Retirement Contributions
Contributions to tax-qualified retirement accounts are deductible based on your net profit from Schedule C or K-1 (Form 1065). Your future self will thank you twice: once for saving and again for the deductions.
8. Vehicle Expenses
Your car serves as more than just a means of getting from point A to B; it’s an extension of your practice when you’re on the go. Work-related travel costs can add up, but luckily, you can write off many of them:
- Tolls and parking
9. Travel Costs
When you’re on the go for client meetings or conferences, you know costs can add up quickly. Besides vehicle expenses, take the time to deduct these expenses:
- Plane tickets
- Hotel stays
- Meals and entertainment
10. Online Professional Listings
If you have listings online (such as Psychology Today or similar sites), you have a chance to save here, too:
- Listing fees
- Subscription costs
- Premium feature costs
11. Marketing and Advertising
In a competitive digital age, it’s important for you to do what you can to amplify your practice’s presence online. But with these deductions, you can go all in on your marketing spend to expand your outreach:
- Domain registration
- Web hosting
- Social media and Google ads
- Professional headshots
- Brochures and flyers
12. Phone and Internet
Keeping connected with clients and colleagues is an important part of your job. Your phone bills (both landline and mobile) and your internet subscription can make a difference during tax season.
13. Networking and Professional Growth
For therapists, there’s no shortage of new information, methods, and resources to help you stay sharp and provide optimal care. And now, you have another reason to keep growing. Investing in networking and professional development can elevate your practice while benefiting your wallet:
- Conference entry fees
- Industry seminars
- Webinars and CE and CME courses
- Professional publications
14. Staff Training and Development
Similarly, investing in your team can pay off in more ways than one; you’ll have better services, a more efficient practice, and savings during tax season.
- Online courses or workshops
- Certification programs
- In-house training materials
- External trainers or speakers
15. Insurance Premiums
You pay for protection and peace of mind when you pay insurance premiums. But here’s another bonus that’ll help you breathe easier: They can ease your tax burden, too. Look for deductions on various types of insurance:
- General liability
16. Business Registration
When you pay to register your business or renew professional licenses, you’re making a necessary investment in your practice’s compliance. These fees can also reduce your taxable income.
17. Rent or Mortgage
Your practice needs a home, and the costs for that home — be it rent or mortgage — are a significant but valuable expense you can report.
Being part of professional organizations enhances your practice’s credibility and provides continuous learning opportunities. Make the most of it — many membership fees are tax-friendly, like these:
- Accredited medical associations
- Continuing education platforms
- Peer support groups
19. Bank Fees
Managing your finances comes with its own set of costs, including maintenance fees, wire transfer costs, and even ATM fees. Keeping track of these expenses is crucial because they can lower your taxable income.
If you’ve invested in expensive equipment or technology, it’s important to remember that these items lose value over time. You can amortize these costs over several years, lessening your tax burden each fiscal year. Keep track of your asset’s lifespan to take full advantage of this.
21. Deadline Alert: Maximize Section 179 Before December 31st
Section 179 offers a valuable tax advantage by allowing you to fully deduct the cost of eligible equipment or software in the same year you purchase it. That means you won’t have to rely on standard depreciation rules or wait until the following tax year to claim a deduction. This is a significant financial benefit, especially if you’re considering a major upgrade to your practice’s equipment or technology. To be eligible, make sure your purchases are in place and operational by December 31st.
The Bottom Line: Make Smart Choices for Your Practice and Your Taxes
Tax season can be stressful, particularly for therapists. However, with a clearer understanding of key deductions and how to navigate the tax process, you’re better positioned to make investments that can enhance both your practice and the patient journey. One investment that can make a significant difference is intakeQ.
intakeQ streamlines your client onboarding with cloud-based, HIPAA-compliant digital forms. It supports e-signatures, integrates with your website, and even allows you to analyze client data. It’s an investment that pays dividends in efficiency and patient satisfaction — plus, it qualifies as tax-deductible (and Section 179 eligible).
If you’re ready to take the first step toward smarter taxes and more efficient practice management, schedule a demo with intakeQ today!
Disclaimer: This article is intended for informational purposes only and should not be considered financial or tax advice. For professional tax or financial advice, consult with a qualified accountant or tax advisor.
Norton, C. (2023a, May 25). Clinical Notes: Why Sharing Them Improves Care. intakeQ . https://blog.intakeq.com/clinical-notes-how-sharing-them-improves-care/
Norton, C. (2023b, July 10). The Best Practice Resources for Continuing Education in Healthcare. intakeQ . https://blog.intakeq.com/top-practice-resources-for-continuing-education-healthcare/
Simplifying Section 179. (n.d.). Section179.org. https://www.section179.org/simplifying_section_179/
Small Business Tax Deductions Can Trim Your Tax Bill. (2023, January 3). Block Advisors; H&R Block. https://www.blockadvisors.com/resource-center/small-business-tax-prep/small-business-tax-deductions/#:~:text=Tax-qualified%20retirement%20accounts%20owned
Warnes, B. (2023, July 20). The Complete List of Tax Deductions for Therapists. Heard. https://www.joinheard.com/articles/the-complete-list-of-tax-deductions-for-therapists