Can Therapy Be a Business Expense?

Many people who work in the mental health industry dream of running their own private therapy practice. The altruistic work of therapy can be an incredibly rewarding career – and when you’re running your own practice, the autonomy over your work increases. 

However, running a private practice isn’t all compassion and altruism – it’s a business. And when it comes to running a successful business, it’s important to look at how costs can be minimized, and profits can be maximized. 

But in the midst of the financial planning – how’s your work-life balance going? Running your own business is hard – and finding a healthy work-life balance is harder. But the bottom line is this – you can’t pour from an empty cup. So in order to deliver your service successfully, you must consider your own wellbeing. And with this in mind – is therapy tax deductible?

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Qualifying Therapy as a Business Expense

In order for therapy to qualify as a business expense, the therapy has to be related directly to your business. 

Ordinary Individuals 

The guidelines on tax deductions laid out by the IRS (Internal Revenue Service) can be seen as quite vague. So let us help you break it down: 

• Provided it is part of a doctor-prescribed regimen, ordinary people can file for tax deductions on therapy. For example, if therapy is sought for an official, physician-diagnosed mental illness, this qualifies for a tax reduction.
• Therapy tax deductions are only considered valid when the activity is part of a physician-prescribed treatment program.
• Nutritional counseling for obesity isn’t valid, nor is marital counseling – unless they have been prescribed by a physician. 
• The overall cost must exceed 7.5% of the individual’s annual adjusted gross income. For less than 7.5%, a therapy-related tax deduction cannot be claimed.

Therapists & Therapy Clinic Owners

Private clinic owners and therapy practitioners are faced with a different set of rules for therapy tax deductions. 

• If the therapy is for yourself, the 7.5% minimum AGI threshold doesn’t need to be complied with. 
• Therapy-related travel expenses can be deducted – e.g. the therapist may not live near the location of the therapy session.
• Aids used in therapy sessions can be deducted. These include things such as workbooks, handouts, cards, puzzles, games, weighted blankets, art therapy supplies, props, therapy sand, calming toys and more.
• Joining professional organizations is an integral part of the journey for many mental health professionals. The expenses associated with such memberships can be deducted. 
• If you pursue a master’s degree in counseling, this can be classed as a business-related expense. However, you can’t deduct the cost of completing the minimum level of education required to become a therapist.

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Tax Deductions for your Home Office

If you use your home as a therapy clinic, you can apply for a tax reduction, provided it’s exclusive to your work. There must be regular therapy sessions conducted in your home office. This deduction can either be regular or simplified:

• Regular Home Office Deduction

Measure the floor space of the home office, then divide this by your home’s total square footage. From here, multiply the value by 100 to determine the percentage of the home office’s floor area. 

• Simplified Home Office Deduction

This involves assigning a cost for every square foot of space in the home office, e.g. deducting $5 per square foot that doesn’t exceed 300 square feet.

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Take Our Quiz

Westchester Therapy Match wants to make sure that you’re matched with the right therapist. We have created a simple quiz that takes less than five minutes to complete. We will use your answers to understand who you are and what you’re looking for so we can match you with the most appropriate therapist. Click here to take the quiz. 

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