7 Most Common Self-Employed Therapist Tax Deductions | TFX (2024)

Editorial team of TFX

• 25.03.22 • 5 min read

During tax season, therapists in private practices often experience many emotions. Finances can seem to hang over you like a shadow. Therapists and business owners might wonder how their self-employment tax affects their business's income and if they need to follow any special provisions. In this post, we will look at some tax deductions for therapists, small businesses, or private practice owners - specifically those who are employed individually or who own their own practice.

Private Practice Tax Write-Offs

In order for the IRS to verify your business expenses and for you to avail self-employed therapist tax deductions, you will need to keep proper records. For this reason, you should keep your tax-deductible business receipts for at least three years after your filing if you get audited. These deductions should be reported on your Schedule C or profit and loss statement. When you complete your 1040, you will need to attach your Schedule C to the form.

Business Meals

Tax deductions for business meals may be available for mental health therapists. There may be occasions when you need to purchase meals for your clients and consultants, such as a lunch meeting. Business meals are typically eligible for a deduction of only 50%. It is, however, true that the current US administration is planning to allow 100% meal deductions for food and beverages in the years 2021 and 2022.

Travel Expenses

The expenses related to business trips outside your home city (at least 24 hours) are deductible for tax purposes, such as meals, lodging, entertainment, business calls, parking tolls, and transportation.

You can claim the following business travel expenses during tax season:

• Travel to and from your destination regardless of the mode of transportation
• Meals
• Entertainment
• Lodging
• Parking and tolls
• Business calls
• A deduction can be claimed for all costs related to operating and maintaining a car, including fuel, oil, lubricant, washing, repairs, parts, tires, supplies, parking fees, and tolls.

Start-Up & Marketing Expenses

Some start-up costs may be incurred and deductible when starting your therapy private practice. As part of the pre-opening startup costs, companies may have to pay for an organization strategy, research, business cards, financing, and technological tools. Promotion, advertising, and labor costs are all included in operating costs after opening.

Continuing Education

You must always keep up with best practices as a private practice therapist and work on improving your skills. Continuing education expenses such as classes, workshops, conferences, and other events may be deducted from your income taxes. The expenses you incur for your profession can be deducted so long as you can prove they are related to your occupation. In this category, you should include trade publications, industry-specific literature, and courses that are relevant to your field.

Mileage Expense

For business-related miles, excluding commutes to work, you can deduct the costs from your private practice therapist taxes.

Mileage expenses can be deducted in two ways: either by using Standard Mileage Rates or by using the Actual Expenses method. In order to claim mileage as a tax deduction, you cannot write off actual expenses like gasoline or car repairs. You can only deduct using one deduction method. Mileage is calculated at 0.56 cents per mile by the IRS for 2021 and 0.585 cents per mile for 2022. Calculating your deductible mileage expenses is as easy as adding up your miles driven for work and multiplying them by the standard mileage rate.

Office Supplies

The costs you incur to maintain your office are tax-deductible. This includes staplers, pens, printers, papers, or even a computer. Small businesses can deduct any office costs or supplies they pay to keep their workplace running. In addition, one can also deduct shipping and handling costs/postage stamps from their tax bill for any purchases.

Legal And Professional Fees

You are eligible for a full deduction for legal and professional fees incurred during the course of conducting your practice.

Incorporating business tax planning into your strategy can optimize deductions, such as payments to accountants, bookkeepers, tax preparers, lawyers, and business consultants. Only costs directly related to your business are deductible. For instance, fees for an attorney who assists in drafting your practice policy or establishing your business entity are deductible, as are costs for obtaining accounting advice.

Qualified Business Income (QBI) Deduction

As a result of the Tax Cuts And Jobs Act, therapists can deduct 20% of their qualified business income. "Pass-through" businesses are eligible for this tax break. As a result of the QBI deduction, taxable income reduces leading partners, sole proprietors, and other business owners to pay less in private practice therapist taxes, which results in a lower effective income tax rate.

Despite working in a trade or business that is excluded from the definition of a qualified one, such as health care, you are still able to deduct the expense if you don't exceed the yearly limit set by the IRS. According to the IRS, you are not subject to the specified service business or trade (SSTB) classification for taxable income under $157,500 ($315,000 if filing jointly).