11 Overlooked Tax Write-Offs for Therapists and Clinicians

March 5, 2024

Female therapists using a calculator and notepad to calculate her tax savings from overlooked tax write-offs for therapist

Are there tax write-offs for therapists you might be overlooking?

It’s essential to know which expenses, fees, and costs incurred to run your business to deduct from the amount you owe the Internal Revenue Service (IRS). It can potentially save you thousands of dollars each year.

To help out, we’ve created a list of tax-deductible expenses for therapists and private practitioners, along with explanations. And. below, we’ve listed eleven lesser-known tax write-offs for therapists and private practice clinicians.

And—keep in mind— you may be able to deduct your Practice Management Software on your taxes. More on this below.

A quick guide to common tax write-offs for therapists

Whether you prepare your own taxes or you work with an accountant (we recommend an accountant help you at least the first year of running your private practice), this guide to tax write-offs for therapists can be a resource to help ensure you maximize your tax deductions.

First, some logistics

For many small businesses, tax deductions are cataloged on IRS Form 1040 Schedule C.

Expenses are organized by type (advertising, fees, office expenses, etc.), which can be a bit confusing since there is some overlap.

Be sure to check with your accountant if you have questions about where to account for each expense.

For detailed information on tax deductions, you can read the IRS’s detailed instructions here.

And now, let’s talk those deductions.

1. SimplePractice practice management software costs

The SimplePractice practice management system is an all-in-one solution that makes running a private practice easy for clinicians. Private practitioners can use SimplePractice to streamline all booking, billing, and EHR capabilities.

Thankfully, the cost of SimplePractice EHR solution is fully tax deductible.

You may enter the SimplePractice EHR as 27a “Other Expenses” on form 1040 Schedule C. Then, in Part V, under “Other Expenses,” create your own description and enter the amount and total on line 48.

This is the IRS 2023 Schedule C form 1040 where tax deductions for therapists can be added on line 27a as Other Expenses

2. Bank fees

Banks are well-known for imposing fees. Fortunately, if those fees were related to running your business, they’re all deductible.

That means you can write off the monthly fees you pay to maintain a business account.

Credit card processing fees are also deductible.

For SimplePractice practice management software users, in addition to deducting the cost of SimplePractice’s EHR (as mentioned above), you can write off the Stripe credit card processing payments.

3. Disposable/consumable office supplies

Another far-reaching category, this category of tax write-offs for therapists includes typical office expenses and supplies, like paper, envelopes, postage, staplers and staples, and printer ink.

For private-practice clinicians, this also includes costs to maintain your office such as toilet paper, hand soap, towels, coffee for clients, landscaping, cleaning services, and magazine subscriptions for the lobby.

Keep in mind, this category only covers expenses for disposable products that aren’t meant to be used after one year. Items that are more expensive and have a longer life, such as office furniture and computers, are counted under depreciation.

4. Depreciating big-ticket purchases (such as computers and office furniture)

This category of tax write-offs for therapists covers all those big-ticket purchases for your business, including office furniture, computer equipment, and improvements to your office.

Unlike office supplies, depreciated items last longer—typically a five- or seven-year period. (The time varies depending on the item.)

You have two options when it comes to depreciating big-ticket items: you can either deduct a portion of the cost over many years, or the life of an item’s worth or you can deduct the entire expense up front for the first year you use the item.

There are pros and cons to either option.

If you’re just starting up your private practice, you might want the money back right away, in which case deducting the full cost in that first year can help.

On the other hand, depreciating (also called amortizing) can be advantageous if you anticipate your taxes increasing in future years.

You can read more about depreciation here, but be sure to discuss your specific circumstances with your accountant.

5. Advertising

This is a broad category and includes everything you spend to promote your practice, including print and online ads, business cards, brochures, online directory fees and the signs you hang outside your office. If you promote your business with Google AdWords (or paid online search), those fees are deductible, too.

6. Membership fees

Do you hold memberships with professional organizations like AAMFT or NASW?

Those fees are deductible.

7. Mileage

If you drive your car for work (other than to and from your office), wear and tear on your auto may be deductible.

And, because it’s the IRS, (and the IRS is nothing if not confusingly thorough), you can deduct car expenses one of two ways:

Use the standard mileage rate set by the IRS each year (for tax year 2023, the reimbursement rate is 65.5 cents per mile driven).
Or deduct the actual expenses you incurred using your vehicle for work, including gas, parking, registration fees, repairs, and so on. This method requires more work but can be preferable if gas is pricey where you live or your car requires frequent maintenance work.

Regardless of which method you use, you can only deduct expenses for work-related use of your car. That includes driving to and from conferences, lunches with colleagues, and going to meet your accountant.

Keep a detailed log of all those expenses, so you’re sure to separate business from personal use.

The guidelines on deducting car expenses can be confusing, so be sure to talk with your accountant, or if you’re feeling intrepid, read all about it here.

8. Contract labor and employee benefits

In addition to deducting employee wages, you can also deduct benefits you pay out to your employees, including health plans, life insurance, and dependent care assistance programs.

You can also deduct the wages, if you hired any contracted freelance employees, such as a virtual assistant, graphic designer, blogger, or business coach.

9. Interest

If you took out a business loan to launch your practice, you can deduct the interest for that loan, along with the interest for the mortgage of your office, credit card and line of credit.

The IRS rules for interest deductions are lengthy, so contact your accountant for more info.

10. Continuing education and conferences

Did you attend any classes or training events over the year? Those expenses are fully deductible, as long as the training was directly related to your business.

If you traveled to attend any conferences or training events, you can also deduct the travel expenses. However, be sure to read up on the details as there are a number of requirements which must be met.

11. Self-employment tax

If you ever worked for an employer before starting your own practice, self-employment taxes can be a rude awakening. Fortunately, you can deduct some of that extra portion you pay for Medicare and Social Security tax.

Disclaimer: This article shouldn’t be regarded as financial advice. We recommend you meet with an accountant or tax professional to help you make these decisions.

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