For therapists in the United States, April 15th looms on the horizon like an unwanted surgery. It’s tax season and it’s time to get ready to pay your old Uncle Sam! The bad news is that you’re about to write a check for an unhealthy amount of money, the good news is that there are several tax deductions that can help.

While we love providing business advice for therapists, be sure to check with your accountant or another tax professional. Tax laws change (almost continuously) and even the Internal Revenue Service instructions can conflict with the law! (See this website for some wacky but true court rulings about IRS instructions.) So when in doubt about your therapy business taxes, do seek help!

The Home Office Deduction for Therapists

One of the best tax deductions for therapists is the home office. Many of you have a dedicated office outside of your home, however, if you’re primarily an online therapist, or if you have an office space for meeting clients in your home, then the home office deduction was meant for you!

Requirements to claim the home office deduction:

  • Regular and Exclusive Use — You must regularly use part of your home exclusively for conducting business. If you have an extra room in your house that you use for your business, you can take the deduction for that extra room.
  • Principal Place of Your Business — You need to demonstrate that you use your home as your main place of business. If you do business outside of your home, but you use your home substantially for your business, you should be able to take the home office deduction.

Usually, deductions for the home office are based on the percentage of your home devoted to business use. This means you can base the deduction on the square footage of the home office.

Deducting Therapy Practice Marketing Expenses

Every dime you spend on marketing your practice is fully deductible. Here are some examples of common therapist marketing expenses:

  • Directory listings (i.e. Find a Therapist)
  • Google Adwords
  • Facebook Ads
  • Business Cards
  • Fliers
  • Website expenses
  • Seminars and Presentations (that you give or sponsor)

Therapist Professional Development

Professional development expenses are also deductible! Here are some examples of the kinds of expenses you can deduct:

  • Professional memberships (APA, ACA, etc.)
  • Industry publications
  • Conference attendance fees
  • Continuing education
  • Online courses and certifications
  • Consulting fees

Software and Technology Deductions

Buy a new computer? You could potentially deduct the cost, depending on your percentage of business use. One idea is to buy a computer specifically for your business use and then use an older computer as your personal computer. Then, you can deduct the full cost of a computer from your taxes.

You can also deduct other therapy business technology expenses such as:

  • Your iCouch subscription
  • Subscriptions to other software services
  • Mobile phone expenses (based on a percentage of business use)
  • Software packages such as MS Office
  • Webcams (if you conduct online counseling for example)

There are dozens, if not hundreds of tax deductions for therapists — you just need to think to take them! Using tax software such as TurboTax makes this almost trivially easy. It’s highly recommended, especially since it walks you through the nuances of each deduction, making it almost impossible to make a mistake. We don’t have any connection to TurboTax — it’s just a great product that can simplify many of these tax-time questions.

Good luck this tax season! Did we miss any common deductions? Have a question? Please leave a comment!

Published by Brian Dear

Brian is the cofounder and CEO of iCouch, Inc. He has an extensive background in software engineering, inbound marketing and mental health practice management.

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4 Comments

  1. Very informative, thank you! I like that this site is giving business advice to mental health professionals because that’s an area where training is lacking. I have my LMHC and a business degree and I really think online therapy is the future! Glad to have found this site and look forward to using the platform!

  2. Can therapist’s write-off the difference between their billed rate and the insurance reimbursement rate ?

    1. We are not attorneys, so please consult one for the final word, however, the short answer is no — unless you actually have an uncollected accounts receivable. Meaning — if you normally charge $110 and the insurance reimbursement is $50, that is not considered a $60 loss. However, if you bill someone $110 and you only collect $50, then you could have the ability to use the “direct write off method” and claim a $60 loss. However, the reason you can’t use direct write off for insurance reimbursement is because you can only use that if you “do not anticipate” the bad debt. Meaning, just asking the question, you’re aware that a “bad debt” would occur with an insurance billing. A direct write off is for an uncollected bill — not a “discount” price.

      But, the real question is: “Is insurance under reimbursement considered a bad debt?” I would argue that it’s not. For example, if you have fish you want to sell and you would normally sell that fish for $25 per fish. If someone comes to you and offers $10 for that fish and you accept that price — that doesn’t count as a $15 loss, but a $10 gain. However, if you paid $12 for the fish, then, yes, you would have a $2 loss for that transaction. The cost of your ice cooler operation could be deducted — but that would be deducted against your overall income and not on a per-fish basis.

      So, let’s get to your practice. If you’re charging $110, but insurance only pays you $50, then you don’t have a loss of $60, but a gain of $50. However, if your cost of goods sold is higher than $50, then you would have a legitimate loss. However, that cost of goods sold is going to be very hard to justify in a mental health business. Unless, you rent your office by the hour or incur a specific expense for the specific therapy session. Meaning, a receptionist who gets paid $15 per hour isn’t going to be part of your cost of goods sold — that would be an operating expense. But, if you rented an office for the specific hour of your session and the rental price was $51 and you only collected $50, then you would have a loss of $1 — not the difference from the $110.

      However, if you own a group practice and you’re paying an independent contractor $75 to conduct the session and you are only getting $50, then you would have a legitimate deduction for the $25 loss. But, common sense would suggest that you’re not using a $75 contractor for a $50 session.

      Hope that helps. Short answer: “I wish, but no, you can’t deduct the reimbursement differential under normal circumstances.”

    2. No. But check with an accountant. Basically, if you are trying to sell a car for $10,000 and only sell it for $5,000, then you can’t claim a loss of $5,000. (But definitely check with an accountant.)

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