Therapist tax deductions: records for a private practice

Counselors, social workers, marriage and family therapists and psychologists work in two ways. Some are staff at an agency, a hospital or a group practice and get a Form W-2. Others run a solo or group practice and file Schedule C, or a business return if they formed an entity.

If you are on staff, your own spending on the job does not reduce federal tax. Federal law files them under miscellaneous itemized deductions, a category barred for every tax year that began after 2017 (26 U.S.C. 67). That covers license fees, CE, a malpractice policy you buy yourself and your own laptop. Your state may still allow some of them.

Many clinicians mix both. For example, you may work weekdays at a community mental health center and see private clients on two evenings. The private caseload is a business, so keep its records apart and claim only its costs.

A practice paid by insurers often gets more forms than it expects. An insurer reports what it paid you on Form 1099-MISC, in Box 6, medical and health care payments. That box covers payments to doctors and other providers of health care services, even when the practice is incorporated (Form 1099-NEC instructions).

The Box 6 line depends on the year of the claim payment. An insurer reported 2025 payments of $600 or more (Form 1099-NEC instructions, 2025), and reports 2026 payments only from $2,000 (Form 1099-NEC instructions). A group practice or a therapy network that pays you as a contractor uses Form 1099-NEC instead, with the same two lines.

Private-pay clients who swipe a card show up on Form 1099-K from your card processor, at any total (IRS, Understanding Form 1099-K). These forms rarely add up to your real income: a January payment can settle a December claim. So the key record is the billing or EHR report for the year, with amounts collected by payer, refunds and write-offs.

Keep the lease or sublease and proof of each rent payment. If you rent rooms by the hour, keep the booking receipts. Rent you pay a psychologist who sublets you an office on weekends may call for your own Form 1099-MISC, owed for 2026 rent of $2,000 or more (Form 1099-NEC instructions).

Telehealth has moved many sessions home. A home office is a part of your home used regularly and only for the practice. A spare room where you see clients by video all week can qualify, while a dining table you clear at night does not (IRS Publication 587).

Bring the room size, the home size and the year’s rent or mortgage interest, utilities and insurance. Those bills feed Form 8829 when actual costs beat the flat method (About Form 8829). The home office checklist compares the two ways.

Driving between two offices on the same day counts as business travel, while the drive from home to your one regular office is commuting (IRS Publication 463). A 2026 drive from a morning hospital shift to your afternoon office is logged at 72.5 cents a mile through June and 76 cents after (IRS mileage rates).

These costs keep a practice open, and each one needs a receipt. Bring the license renewal, board fees and any exam fee. Add CE courses, conference fees and required trainings, with the agenda or certificate. Paid clinical supervision is case review by a senior licensed clinician, often required before full licensure. Keep those invoices, and the same for peer consultation.

Malpractice cover is a core cost. Keep the professional liability invoice, plus general liability if your office lease asks for it. Add dues to a group such as APA, NASW, ACA or AAMFT, and directory listing fees.

Software is now a big line. Keep a year of charges for the EHR, telehealth video, scheduling, billing and secure messaging tools. Add billing or credentialing service fees and card processing fees. Testing kits, books, art supplies and toys for child sessions belong here as well.

A specified service trade or business is a field whose QBI deduction fades out at higher income. A therapy practice is one, because the field of health covers psychologists and similar healthcare professionals (26 CFR 1.199A-5). On a 2025 return, it keeps the full deduction while taxable income before it is $197,300 or less, or $394,600 joint, and loses it by $247,300 or $494,600 (Form 8995 instructions).

For 2026 returns, the full deduction holds up to $201,750, or $403,500 joint, and the fade-out runs to $276,750 or $553,500 (Rev. Proc. 2025-32). Bring last year’s Form 8995 or 8995-A so your preparer can see any loss carried forward.

If you pay your own health insurance as a sole owner, keep the premium statements, since the deduction is figured on Form 7206 (About Form 7206). Bring the year-end statements for any SEP-IRA or solo retirement plan, and the date and amount of each quarterly tax payment. The self-employed checklist explains when those payments are due.

• 26 U.S.C. 67: No miscellaneous itemized deduction is allowed for any taxable year beginning after December 31, 2017.
• Form 1099-NEC instructions: For tax years beginning after 2025, the reporting threshold for Form 1099-NEC and for rents and medical and health care payments on Form 1099-MISC is $2,000; payments to a corporation are generally not reportable, but medical and health care payments to a corporation are.
• Form 1099-NEC instructions, 2025: For 2025, Form 1099-NEC reported nonemployee pay of $600 or more, and Form 1099-MISC reported rents and medical and health care payments of $600 or more.
• IRS, Understanding Form 1099-K: A payment card processor sends Form 1099-K for card payments no matter how many or how much; payment apps and online marketplaces must send one when payments for goods or services exceed $20,000 in more than 200 transactions, and may send one for less.
• IRS Publication 587: The simplified home office method multiplies $5 by the area used for business, limited to 300 square feet; the space must be used regularly and exclusively.
• About Form 8829: Form 8829 figures the allowable expenses for business use of the home on Schedule C.
• IRS Publication 463: Travel to a temporary work location expected to last a year or less is deductible; trips from a union hall to the job are commuting; only the extra cost of hauling tools is deductible; with a home principal place of business, trips to clients are deductible.
• IRS mileage rates: The business standard mileage rate is 70 cents a mile for 2025, 72.5 cents for January 1 to June 30, 2026, and 76 cents for July 1 to December 31, 2026.
• 26 CFR 1.199A-5: Services in the field of health mean medical services by physicians, nurses, physical therapists, psychologists and similar healthcare professionals; the field does not include health clubs or health spas that provide physical exercise or conditioning.
• Form 8995 instructions: For 2025, a specified service trade or business is treated as a qualified business if taxable income before the QBI deduction is $197,300 or less ($394,600 joint); the SSTB share phases out up to $247,300 ($494,600 joint).
• Rev. Proc. 2025-32: For taxable years beginning in 2026, the section 179 limit is $2,560,000, reduced once property placed in service exceeds $4,090,000; the section 199A threshold is $201,750 ($403,500 joint), with the phase-in range ending at $276,750 ($553,500 joint).
• About Form 7206: Form 7206 is used to figure the self-employed health insurance deduction.