Tax Deductions for Mental Health Therapists: What Can You Write Off?

The Big Question: What Can I Write Off?

If you’re a private practice owner, one of the first questions you might ask your CPA is: “What can I write off?”

As with most tax-related topics, the answer is: “It depends.”

The IRS defines deductible business expenses as those that are both ordinary (common in your industry) and necessary (helpful for business operations). But what’s ordinary and necessary for a therapist isn’t the same for a tech startup or a restaurant.

Here’s what you need to know to navigate deductions, gray areas, and maximize your tax savings.

Obvious Deductible Expenses

Some expenses are no-brainers when it comes to deductions. These include:

1. Operational Costs

•     Office Space: Rent, utilities, and property insurance.
•     Professional Requirements: License renewals, continuing education, and malpractice insurance.

2. Employee-Related Expenses

•     Payroll Costs: Wages, salaries, and payroll taxes.
•     Benefits: Health insurance, retirement plans, and other employee benefits.

These expenses are directly tied to running your practice and fall squarely in the “ordinary and necessary” category.

Navigating the Gray Areas

Some expenses aren’t as clear-cut and require careful documentation to determine their deductibility.

1. Mixed-Use Items

Items used for both business and personal purposes—like your cell phone or internet service—can be partially deducted. To claim these, you must:

•     Track the percentage of business vs. personal use.
•     Keep detailed logs of business-related activities.

2. Home Office Deduction

To qualify, your home office must meet two criteria:

•     Exclusive Use: The space is used only for business purposes.
•     Principal Place of Business: It’s where you conduct significant business activities, such as client scheduling or administrative work.

Pro Tip: Use photos or floor plans to document your home office setup.

3. Professional Attire

Clothing is deductible only if it’s required for your work and unsuitable for everyday use (e.g., scrubs or branded uniforms). A blazer you wear to the office, no matter how professional, won’t qualify.

Maximizing Your Deductions

1. Make a List

Write down all expenses you’re unsure about—subscriptions, software, travel costs, or even professional networking events.

2. Consult with a CPA

Your CPA can help you evaluate these expenses and identify deductions you may have overlooked. Ask specifically about industry-specific write-offs that might not be obvious.

3. Keep Detailed Records

To back up your deductions, maintain proper documentation:

•     Receipts and invoices.
•     Mileage and time-use logs for travel or mixed-use items.
•     Notes explaining the business purpose of expenses.

Why Industry Expertise Matters

A CPA who specializes in private practices can provide invaluable guidance. They:

•     Understand Your Unique Challenges: From managing client confidentiality to navigating therapy-related expenses.
•     Reduce Audit Risk: By ensuring your deductions align with IRS guidelines.
•     Optimize Tax Strategies: Tailoring solutions to your specific practice and financial goals.

When hiring a CPA, ask about their experience with private practice clients and how they can help you maximize your deductions.

The Bottom Line

The question “What can I write off?” may not have a one-size-fits-all answer, but with the right CPA and a proactive approach, you can navigate the gray areas with confidence.

By understanding the basics, consulting a specialist, and maintaining detailed records, you’ll create a tax strategy that optimizes your savings and minimizes risk.

When in doubt, lean on your CPA—they’re not just there to crunch numbers but to help your practice thrive.