Tax deductions therapists can miss, and how each works in 2026

The everyday costs of a therapy practice, from the license renewal to the EHR subscription, are business expenses, and section 162(a) allows a deduction for the ordinary and necessary expenses of carrying on a trade or business. Several of the deductions in this post can be lost for reasons that have little to do with obscure rules. An expense paid before the clinician is fully licensed, or paid personally by an owner whose practice is an S corporation, can change whether the expense is deductible at all and on whose return.

This post sets out the 2026 federal treatment of each item, with the primary source for the rule, for therapists, counselors, social workers, and marriage and family therapists in solo and small group practice.

Who paid the expense decides where it can be deducted

A therapist who practices as a sole proprietor reports the practice on Schedule C and deducts these expenses there. The Schedule C instructions say a single-member domestic LLC generally is not treated as a separate entity for federal income tax purposes, so an owner of one files Schedule C unless the LLC has elected to be treated as a corporation. A Schedule C deduction also lowers self-employment tax, because section 1402(a) measures net earnings from self-employment after the deductions attributable to the business.

An owner who works in their own S corporation is in a different position. Section 3121(d)(1) treats any officer of a corporation as an employee for payroll tax purposes, so an owner who serves as an officer is the corporation’s employee, and an associate paid on a W-2 is an employee too. An employee’s unreimbursed business expenses are miscellaneous itemized deductions, and section 67(h) now says that no miscellaneous itemized deduction is allowed for any tax year beginning after December 31, 2017. As first written, that suspension covered only tax years beginning before January 1, 2026. Section 70110 of P.L. 119-21 struck that end date for tax years beginning after December 31, 2025, so the suspension continues for 2026 and has no scheduled end. An S corporation owner or W-2 associate who pays a practice expense personally and is not reimbursed gets no federal deduction for it.

For an employee, the tax benefit comes through the employer. Under Treasury Regulation section 1.62-2, amounts paid under an accountable plan are excluded from the employee’s gross income, are not reported as wages on the W-2, and are exempt from payroll taxes. The same regulation allows a plan to reimburse only business expenses that would be deductible under the Code’s business expense provisions, so the rules in the rest of this post still decide what can be reimbursed. Setting up the plan is covered in our post on accountable plans.

Continuing education

The rule for education is in Treasury Regulation section 1.162-5. Education is deductible as a business expense, even if it leads to a degree, when it maintains or improves skills required in your trade or business, or when the law or an employer requires it for you to keep an established status or position. The continuing education hours a licensing board requires for renewal fit both descriptions, and the regulation says the skills category includes refresher courses, courses on current developments, and academic or vocational courses. One of its examples is a psychiatrist in private practice who trains at an accredited psychoanalytic institute, in a program that will qualify them to practice psychoanalysis. The cost is deductible, because the training improves skills used in the existing practice and does not qualify them for a new trade or business.

Two kinds of education are not deductible under the regulation even when they do build skills. The first is education needed to meet the minimum educational requirements of your trade or business, which the regulation says are determined from the requirements of the employer, the applicable law and regulations, and the standards of the profession. The second is education that is part of a program of study that will qualify you for a new trade or business, and Publication 970 adds that this is true even if you do not plan to enter it. A licensed counselor or social worker starting a degree that leads to a different license should settle which side of that line the program falls on before enrolling, since the answer turns on whether the new license is a new trade or business.

For education that qualifies, Publication 970 lists tuition, books, supplies, lab fees, and similar items, along with certain transportation and travel costs. When you travel away from home primarily to attend, the regulation allows the travel, meals, and lodging, less the part spent on personal activities such as sightseeing, and section 274(n) generally limits the meals to 50 percent. If the trip is primarily personal, the cost of getting there is not deductible, and only the meals and lodging for the time spent in the course are.

IRS Topic 513 limits the deduction for work-related education to self-employed individuals and a few narrow groups that do not include an employee therapist, so for an employee therapist, including an S corporation owner, the course has to be paid by the practice or reimbursed under its accountable plan to be deducted. Tuition the practice does not pay or reimburse can still qualify for the lifetime learning credit when the course is at a college, university, or other eligible educational institution. Publication 970 says the credit is available for courses taken to acquire or improve job skills, and section 25A sets it at 20 percent of up to $10,000 of expenses, phased out for 2026 between $80,000 and $90,000 of modified adjusted gross income ($160,000 and $180,000 on a joint return).

License renewals, board fees, and association dues

The Schedule C instructions put licenses and regulatory fees for your trade or business, paid each year to state or local governments, on line 23 with taxes and licenses. A state licensing board’s renewal fee for a counseling, social work, marriage and family therapy, or psychology license is that kind of fee.

Dues to a professional association are deductible in full under Treasury Regulation section 1.162-15(c), subject to the limits in section 1.162-20, except for any portion the association tells you goes to lobbying or political spending, which section 162(e)(2) makes nondeductible. An association that reports a lobbying share gives it with the dues notice, so keeping the notice with the receipt keeps that figure on hand at filing time.

For an S corporation owner or a W-2 associate, the same fees are the practice’s to pay or reimburse, for the reason set out above.

Clinical supervision paid by a pre-licensed supervisee

A clinician practicing under an associate-level license while completing the supervised hours a state board requires for full licensure may pay a clinical supervisor personally. Whether that fee is deductible is a harder question than it looks. IRS guidance does not address clinical supervision fees by name, and the court decisions we found on supervision fees involve psychiatrists training as psychoanalysts, not supervised hours toward a first license. The education regulation is the closest framework, and it points in two directions.

Where a board requires supervision as a condition of keeping the associate license you practice under now, it has something in common with education the law requires to keep an established status, which section 1.162-5(a)(2) allows. Against that, the regulation says that already performing services does not establish that you have met the minimum educational requirements for the work. Its example is a law firm employee who finishes law school at night and takes a bar review course as a condition of keeping the job, and those costs are not deductible because they meet the minimum requirements for qualification. Publication 970 makes the same point with an engineering student who already works part time as an engineer. Supervised hours that a board requires before it will grant the full license resemble that second pattern, which is our reading of the regulation by analogy and not a rule the IRS has stated.

What follows depends on how the supervisee is paid. An associate on a W-2 cannot deduct the fee for 2026 whatever the answer, because it would be an unreimbursed employee expense under section 67(h). For a self-employed associate reporting on Schedule C, the deduction is a position to evaluate on the facts, which are the board’s rules, the supervision agreement, and what the supervision covers, and those documents belong in the file before the deduction goes on the return. Whether an associate is an employee or a contractor in the first place is its own question, covered in our post on W-2 and 1099 clinicians. Consultation that a fully licensed therapist pays for to improve clinical work stands on firmer ground, as education that maintains or improves skills, unless it is part of qualifying for a different license.

Telehealth platforms, EHR subscriptions, and equipment

Subscriptions to an EHR, a telehealth platform, practice management software, or a scheduling and secure messaging service are ordinary and necessary expenses of a practice that uses them, deductible under section 162(a). Publication 334 says that under the cash method you generally deduct expenses in the year you actually pay them, although an expense paid in advance may not be deductible when paid. An annual plan paid up front falls under the 12-month rule in Treasury Regulation section 1.263(a)-4(f), which allows the deduction when paid only if the benefit does not extend beyond the earlier of 12 months after it begins or the end of the following tax year. Our year-end planning post works through that rule with an example.

The laptop, camera, headset, and lighting used for telehealth are equipment. An item that costs $200 or less is a material or supply under Treasury Regulation section 1.162-3, deductible in the year it is first used without any election, while more expensive equipment generally has to be capitalized rather than deducted as an expense. The de minimis safe harbor in Treasury Regulation section 1.263(a)-1(f) lets a practice without an applicable financial statement deduct property costing up to $2,500 per invoice or per item, the amount set by Notice 2015-82 for tax years beginning on or after January 1, 2016. To use it, the practice has to have accounting procedures in place at the beginning of the year that expense such purchases, has to treat the purchase as an expense in its books, and has to elect the safe harbor each year with a statement attached to its timely filed return. For an S corporation the election is made by the corporation, not by the owner. Equipment above that amount goes through depreciation, and the 2026 depreciation options are in the year-end post.

Malpractice insurance

Publication 334 lists malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients among the business insurance premiums you can deduct, and the Schedule C instructions place business insurance premiums on line 15. A policy paid in advance follows the same 12-month rule as a prepaid software plan, and the example in the year-end post is a one-year malpractice or liability policy paid in December for the following calendar year.

Publication 334 says you cannot deduct premiums for a policy that pays for your lost earnings due to sickness or disability, while overhead insurance that pays for business overhead expenses during long periods of disability is on its list of deductible coverage. A W-2 associate who buys their own malpractice policy is in the employee position described above, and the deduction depends on the practice paying or reimbursing it.

The home office

Qualifying on Schedule C

Under section 280A(c)(1), home office expenses are deductible only for a part of the home used exclusively and on a regular basis as the principal place of business, as a place where patients, clients, or customers meet or deal with you in the normal course of business, or, for a separate structure not attached to the house, in connection with the business. A room that also serves as a guest room or a family office does not meet the exclusive use test.

The client test has a detail that matters for telehealth. Publication 587 requires that you physically meet with patients, clients, or customers on your premises, and says occasional meetings and telephone calls do not qualify. A therapist who sees clients by video from a room in the house is relying instead on the principal place of business test, which Publication 587 applies by weighing the relative importance of the activities at each location and the time spent at each. When the home office is the only place the practice operates, it is the principal place of business. A therapist who also rents an office can qualify through administrative work. The statute counts a home office used for the administrative or management activities of the business when there is no other fixed location where substantial administrative or management work is done, and Publication 587 lists billing patients, keeping books and records, and setting up appointments among those activities. It adds that having suitable space elsewhere and choosing to do that work at home does not disqualify the home office.

The simplified method or the regular method

A Schedule C filer chooses between two methods each year. Rev. Proc. 2013-13 created the simplified method, which multiplies the office’s square footage, up to 300 square feet, by a prescribed rate of $5, so it cannot exceed $1,500. The revenue procedure lets the IRS update the rate, and IRS Topic 509, last updated in September 2026, still gives $5. Under the simplified method there is no depreciation, an amount over the income limit is lost rather than carried forward, and mortgage interest and property taxes are treated as personal expenses, deductible on Schedule A only if you itemize. The regular method, figured on Form 8829, applies the office’s share of the home to actual costs such as rent or mortgage interest, property taxes, utilities, insurance, and repairs, plus depreciation for an owned home, and a disallowed amount carries forward. For a homeowner who takes the standard deduction, the office’s share of mortgage interest and property taxes is deductible only under the regular method, and the Form 8829 instructions have that filer enter all of both amounts so the business share can be figured. Depreciation claimed under the regular method is recaptured as gain when the home is sold, which the IRS’s comparison of the two methods notes does not happen for years the simplified method is used. Under either method, section 280A(c)(5) limits the deduction to the gross income from the business use of the home less the business’s other expenses.

Take a hypothetical therapist who sees clients only by telehealth from a 150-square-foot room used for nothing else, in a 1,000-square-foot rented apartment. Rent for 2026 is $24,000, and utilities and renter’s insurance come to $3,000. The office is 15 percent of the home, so the regular method gives 15 percent of $27,000, or $4,050. The simplified method gives 150 square feet at $5, or $750. If the gross income limit does not reduce either figure, the regular method produces $3,300 more in deductions for the year. For a therapist who owns the home, the comparison also has to count the office’s share of mortgage interest and property taxes, along with the depreciation recapture.

As an S corporation owner

An S corporation owner cannot claim a home office on their own return. Publication 587’s decision chart ends at no deduction for anyone using the home as an employee, and the IRS’s page on the simplified option says taxpayers can no longer claim a deduction for a home office as an employee, because miscellaneous itemized deductions for employee business expenses were eliminated for tax years beginning after 2017. The route is reimbursement by the corporation under its accountable plan. Section 280A(c)(1) still applies to the employee, with an added condition that the exclusive use be for the convenience of the employer. The $5 simplified method is not available for this, because section 4.02 of Rev. Proc. 2013-13 says it does not apply to an employee who receives reimbursements for a home office under a reimbursement arrangement with the employer. The reimbursement is figured from actual costs and the office’s share of the home, as our accountable plan post describes.

Health insurance premiums

Under section 162(l), a self-employed therapist can deduct premiums for medical insurance for themselves, a spouse, dependents, and a child who has not reached age 27 by the end of the year. The deduction is figured on Form 7206, or in simpler cases on a worksheet in the Form 1040 instructions, and claimed on Schedule 1 of Form 1040, not on Schedule C. For a Schedule C filer, the Form 7206 instructions say the policy can be in the name of the business or in the name of the individual.

The deduction cannot exceed the earned income from the business under which the plan is established, which the 2025 Form 7206, and the 2026 draft, measure as net profit reduced by the deductible part of self-employment tax and by retirement plan contributions from the same business. It is not allowed for any month in which you were eligible to participate in a subsidized health plan maintained by your own employer or by the employer of your spouse, a dependent, or a child under 27, and the Form 7206 instructions say that applies even if you did not actually participate. Section 162(l)(4) keeps the deduction out of the self-employment tax calculation, so it lowers income tax but not self-employment tax.

For an S corporation owner who holds more than 2 percent, the deduction works only through payroll. The Form 7206 instructions say that when the policy is in the owner’s name and the owner pays the premiums, the corporation must reimburse them and report them as wages in box 1 of the W-2, or the plan is not considered established under the business. Section 162(l)(5) then treats the owner’s wages from the corporation as the earned income that limits the deduction, and the 2025 Form 7206 and the 2026 draft use the Medicare wages in box 5 of that W-2. The details, including the W-2 boxes and the December 31 timing, are in our post on health insurance for S corporation owners.

Where we help

Each of these deductions holds up on the strength of a record made when the money was spent, such as the board’s renewal receipt, the course certificate, the supervision agreement, the policy declarations page, the office measurements, and the expense report behind each reimbursement. Our affiliated bookkeeping company, bookkeepz, LLC, does the monthly bookkeeping that keeps those records together for therapy practices, so the deductions show in the books during the year instead of being reconstructed at filing time.

We go through these items with therapists as part of tax planning, ideally before December 31, while there is still time to change how 2026 expenses are paid. Deductions found during the year also change what the remaining quarterly estimated payments need to be, the rest of the December list is in our year-end tax planning post, and retirement contributions are covered in our post comparing a solo 401(k) and a SEP-IRA. How we work with therapy practices is on our page for therapists, and if you want your own expenses reviewed for 2026, book a consultation.

This post describes federal tax rules for 2026 as general information. It does not cover state income tax rules or any licensing board’s requirements, and it is not advice for any particular practice.

• Tax planning
• Therapists
• Home office