The Complete List of Tax Deductions for Therapists

Tax deductions can save your therapy practice a significant chunk of change. But if you don’t know what qualifies as a deductible expense, you’ll miss out.

That’s because, even if you track your deductible expenses, you need to keep receipts on hand in order to report them. In case of an audit, the IRS will demand receipts for your tax deductions. Reporting expenses without keeping proof of purchase in your files puts you on shaky ground, and could one day result in serious fines.

The best thing to do is review all the deductible expenses you may qualify for, and start tracking them—and saving your receipts—now. Our comprehensive list of tax deductions for therapy practices will get you started.

Itemized vs. standard deductions

If your private practice is a pass-through entity—meaning you report income and expenses on Form 1040, your personal tax return—you have the choice between filing for a?standard tax deduction?or?itemizing your expenses.

The?standard deduction?is a flat rate deducted from your taxes, based on your income tax bracket. You can opt for the standard deduction instead of itemizing each of your business expenses.

When you?itemize your expenses,?you list all of your eligible business expenses on Schedule C of your tax return, and deduct that amount from your taxable income.

So, which method is best? It depends on how many expenses you have. Put simply, if your itemized expenses add up to a larger amount than the standard deduction, you should choose to deduct your itemized expenses. If you’d save more on taxes by claiming a standard deduction, you should claim the standard deduction.

The catch is that you won’t know which method will reduce your tax bill the most unless you itemize your deductions and make the comparison with the standard deduction. If you want to save money on taxes, there’s no way to avoid tracking your deductible expenses.

Advertising and marketing

The cost to market or advertise your therapy practice is tax deductible.?

Eligible purchases include:

• Mail and print ads
• Online advertising?
• Website design and maintenance
• Professional headshots
• Logo design
• SEO tools or consultation
• Business cards?
• Brochures
• Sponsorships
• Promotional items like pens or notepads
• Monthly fees for directory listings (e.g. Psychology Today)

There are a few exceptions to be aware of, however:

• Signage.?Temporary signs (those used for one year or less) can be deducted as advertising expenses, but permanent signs must be depreciated as assets.
• Vehicle ads.?While you can deduct the cost of putting promotional materials for your practice on your vehicle, you can’t deduct other vehicle-related expenses (like mileage) as an advertising expense.
• Recruitment.?The cost of placing help wanted ads is a deductible business expense, but it is not an advertising expense.

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