Tax season in private practice brings with it the opportunity to take advantage of tax deductions and write-offs. While it may initially seem overwhelming, understanding tax deductions can be incredibly beneficial, potentially saving you hundreds or even thousands of dollars for your business. As a private practice owner, you can deduct or "write off" many business-related expenses from your income.
Below are some common tax deductions:
- Advertising. This can include a variety of promotional costs, such as business cards, online or print advertisements, promotion in online directories, or paid search.
- Business meals. Meals purchased for business-related purposes, such as lunch for a meeting with a co-worker, client, or consultant, can be eligible for deduction.
- Bank fees. Additional fees from the bank can be deducted; this can include checking account fees, interest, or credit card processing fees.
- Membership fees. If you belong to any professional organizations, such as the APA, these expenses can also be deductible.
- Education. Many therapists choose to continue their education, attending courses, workshops and conferences to further improve their skills and learn how to run their own businesses. As long as these endeavors apply to your practice, the costs can be written off.
- Home office expenses and supplies. These can include pens, scissors, staplers, printer ink, postage, small furniture pieces, and cleaning supplies.
- Software services. Any practice management software, along with business software such as Google Drive, is eligible for deduction.
- Rent and utilities. If you run your private practice from an office, your rent and utilities (such as a phone or electric bill) can often be written off. If you’re working out of your home or sharing utilities for business and personal use, this can get tricky -- you’ll only be able to deduct your percentage of business usage.
- Business registration and license fees. This is particularly important if you’re new to private practice this year; you’ll be able to write off a lot of the startup business costs. Renewal of your license can also be written off.
- Travel expenses. Deductions from travel can add up quickly. This includes anything used for business purposes and typically requires that you are away from your residential city for at least 24 hours. Costs eligible for deduction include mileage, meals, and parking.
- Personal therapy. Are you seeing your own therapist? Money spent on personal sessions can also be deducted as an expense.
The list goes on, with additional write-offs available for costs such as insurance, legal or professional fees, moving expenses, and salary and benefits for any private practice owners who have employees.
While the above list is a general overview of some helpful write offs, it’s important to remember that your deductions can vary based on your business entity and personal situation.