The Therapist’s Guide to Tax Deductions: Maximize Your Savings in 2025!

Welcome to the tax deduction game plan every practice owner has been waiting for! Whether you’re just getting familiar with the concept of tax deductions or looking for those hidden savings, this guide covers essential deductions that can lead to significant tax-time savings.

Why Are Deductions So Important?

Simply put, deductions lower the amount of income that’s subject to tax, meaning more money stays in your pocket. It’s about making sure every qualifying dollar you spend on your practice works to reduce your tax bill.

The Real Impact on Your Bottom Line

It’s easy to get excited about tax deductions, but remember: a deduction reduces your taxable income, not your tax bill dollar-for-dollar. Think of it this way: for every $1 you spend on a deductible expense, you save roughly $0.10 to $0.37 in taxes, depending on your tax bracket. So, while deductions are fantastic for trimming down your tax bill, they’re not a reason to overspend. In other words, don’t spend a dollar to save a quarter! Always assess whether a purchase is necessary for the growth or operation of your practice. If it’s something you’d buy anyway, then it’s a win-win—an essential expense with a tax bonus.

Working with an accountant can also help you prioritize these deductions so that you’re maximizing your savings without overspending.

Without further ado, here are the tax deductions we see in most private practices.

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1. Office Space: Rent or Home Office Deduction

• Rent or Lease Costs: If you rent an office, these expenses are fully deductible, including utilities like electricity, internet, and phone bills.

• Home Office Deduction: If you work from home, you can deduct a portion of your rent or mortgage—but only if your home office is exclusively used for business purposes. This means no kitchen counters or dining room tables. If you’re eligible, the IRS offers a simplified option—$5 per square foot of your dedicated office space, maxing out at $1,500—or you can calculate the percentage of your home used for business.

Note: How you deduct your home office may vary based on your business entity, which is why it’s essential to work with a professional tax preparer!

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2. Continuing Education and Training

Continuing education is a must for clinicians, and the good news is that you can deduct expenses for courses, workshops, and certifications that help you grow professionally. As a licensed professional, maintaining and expanding your skills is crucial, and the IRS allows you to write off costs that enhance your practice. However, coursework to obtain a new trade does not qualify as deductible, so make sure your educational pursuits relate directly to your practice.

• Professional Conferences and Retreats: If the primary purpose of the conference or retreat is continuing education or improving your business skills, you can deduct the cost of the event and travel within the U.S. If it’s more about socializing, the costs aren’t deductible. For international events, check out our blog post here for important details on how to properly deduct International Business Travel.

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3. Marketing and Advertising

Whether you’re listing your services on a professional listing website, running Google Ads, or printing business cards, these expenses are deductible. Even professional headshots and social media expenses (if related to your business) qualify.

• Advertising Costs: This includes all expenses that contribute to promoting your practice, such as a website revamp, SEO services, or printed flyers.

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4. Professional Liability and General Business Insurance

Protecting your practice with insurance is not only wise but deductible. This includes malpractice insurance, general liability, and any additional policies that safeguard your practice or protect against legal claims. Insurance is a crucial part of a financially sound business.

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5. Software and Practice Management Tools

Industry-specific software, such as scheduling, billing, and note-taking systems, are all fully deductible. Subscriptions to platforms that help you manage your practice—like email, payroll software, project management, and more—can add up, so be sure to track these expenses.

• Additional Software: Many clinicians use apps or software for other parts of their practice management, like meeting platforms or bookkeeping software, which also qualify as deductible business expenses.

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6. Supervision, Professional Consultations, and Memberships

• Supervision: If you’re offering supervision as part of your clinicians’ licensure process or professional development, your related costs, may be deductible as business expenses. Supervision helps your team grow while keeping your practice compliant and clinically strong.

• Professional Memberships: Memberships in professional organizations or local networks can be written off as well. These memberships not only offer valuable networking and education but also help establish credibility in the field.

• Professional Consultations: In addition to supervision, consultations with other professionals to discuss specific cases or enhance your skills can also be deducted as business expenses.

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7. Self-Employed Health Insurance

If you’re self-employed and not covered by a spouse’s work health insurance plan, you can deduct your health insurance premiums as a business expense. This can make a big impact on your tax bill if you’re paying for your own coverage.

Important: How you deduct health insurance may depend on your business entity, so working with a tax accountant is key to maximizing this deduction.

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8. Mileage for Business Travel and Errands

Mileage used to travel for business (like visiting a referral partner for lunch, picking up supplies, or heading to a professional event) is deductible at the IRS mileage rate for the year. Just be sure to log your miles! Keep in mind that commuting miles—travel from your home to your regular office location—are not deductible.

Pro Tip: Use a mileage tracking app to log your business travel automatically, making sure you have a solid record if the IRS ever requests verification.

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9. Payment Processing Fees

Do you accept payments through Stripe, Square, or other services? Processing fees from these platforms are deductible, whether they’re flat monthly fees or a percentage of each transaction. These expenses often go unnoticed, so remember to track these for a full deduction come tax time.

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10. Payroll Costs

If you have employees, payroll costs are fully deductible. This includes not just wages but also employer taxes, benefits, and workers’ compensation insurance. Payroll can be one of the largest expenses for group practices, and tracking these deductions carefully is essential for maximizing your tax savings. Even the cost of paying independent contractors qualifies.

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11. Qualified Business Income (QBI) Deduction

This deduction allows eligible practice owners to write off up to 20% of their business income. However, if a business is making significant business profit or those in high income households may see their QBI deduction phased out at certain income levels.

Pro Tip: Phaseout thresholds change every year, and for 2025 the QBI deduction begins to phase out if your income is between $197,300 to $247,300 for single filers and $394,600 to $544,600 for joint filers.

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12. Tax Help, Bookkeeping, and Professional Services

Professional accounting and tax preparation fees are deductible, as are other professional services that help your business run smoothly—like legal fees, billers, virtual assistants, or business coaches. These services can save you time and help you manage the operational side of your practice, allowing you to focus more on what you do best—helping your clients get well.

• Working with a professional: Many practice owners try to DIY their taxes, but working with a CPA or EA ensures that you take full advantage of deductions and stay compliant. Tax laws change frequently, and the details of what’s deductible can vary based on your specific practice and business structure. So, we always recommend working with a tax professional for the best results.

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Understanding all these deductions is the first step in reducing your tax bill.

The next is tracking them! Whether you prefer spreadsheets, an app, or keeping receipts in a good old-fashioned folder, consistency is key. When in doubt, consider Money for Therapists: All About Tax, an inexpensive, comprehensive course that dives deep into how taxes work specifically for private practice owners. This course is a lifesaver for learning how to manage deductions, understand tax obligations, and feel confident when tax time comes around.

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What’s New for 2025? Fresh Tax Law Highlights from OBBB

New Tax Law Changes That May Actually Help  Private Practice Owners

• QBI Deduction Is Now Permanent—With Higher Phaseouts

  The 20% deduction on business profits is here to stay. For practice owners and other SSTBs, phaseouts begin at $150K (single) and $300K (married filing jointly), but has larger phase out ranges giving more room before it disappears.

• Bonus Depreciation Back at 100%

  Starting Jan 19, 2025, business owners can fully deduct qualifying purchases (furniture, equipment, office buildouts) in the year placed in service.

• PTET Still Offers Big Savings in High-Tax States

  If you’re in a PTET-eligible state and your practice is taxed as an S-Corp or partnership, you can pay state tax at the business level—reducing your federal taxable income. PTET was untouched by the new bill and remains a strong tax-saving strategy for high earners.

• Standard Deduction Slightly Increased

  More of your income is automatically tax-free. For 2025, it’s $31,500 MFJ, $23,625 HOH, and $15,750 Single/MFS.

• Child Tax Credit Made Permanent

  Set at $2,200 per child, with up to $1,400 refundable. No changes in benefit levels, but it’s now locked in

Deductions That Sound Good… But Probably Don’t Apply

• Tips Deduction 

  Only available to industries that customarily received tips before Dec 31, 2024—and private practice isn’t likely one of them. You can't reduce your fee and ask clients to tip.

• Overtime Deduction 

  Applies to hourly W-2 workers only, and only the “extra pay” part qualifies. Most clinicians and business owners won’t see a benefit.

• Car Loan Interest Deduction

  For personal vehicles only (not business-owned), purchased in 2025, assembled in the U.S., and with income caps of $100K single / $200K MFJ. Very limited use case.

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Wrap Up: Keep More of Your Hard-Earned Money

Navigating tax deductions as a practice owner doesn’t need to be overwhelming! With the right strategy, you can keep more of your earnings and ensure your practice is as financially healthy as possible. Remember, when it comes to tax preparation, we always recommend consulting a professional CPA or EA. The tax world is too complex and ever-changing to handle alone!

So, happy deducting, and here’s to a profitable year ahead!

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This article is designed to provide information only and should not be considered legal or tax advice. Because of the complexity of the law and the variables in your own personal tax situation, you can’t rely on our advice specifically related to your unique circumstances. In order to get the best tax savings and legal advice available to you, you should consult with your own accountant, attorney or advisor regarding your particular facts and circumstances. GreenOak Accounting is an accounting firm that specializes in working with counselors and therapists in private practice. We provide monthly accounting & bookkeeping services, 1-time services and online courses. For more information on our specialized services for therapists please visit www.greenoakaccounting.com

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