Income levels for private practice therapists in the United States range widely, and they’re affected by a number of factors specific to each therapist.

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The more pertinent question is: How much money can a private practice therapist in your position expect to earn?

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Here’s what you need in order to find out.

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How much do private practice therapists make on average?

In 2023, 60% of therapists in private practice earned between $25,000 and $100,000 net income. Just under 30% of therapists earned less than $25,000, and the remaining earned $100,000 or more.

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That’s based on Heard’s 2024 Financial State of Private Practice Report, which surveyed over 2,000 therapists in private practice. 

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For a more detailed breakdown of the numbers—plus information on how expenses, insurance, and rates affected therapists’ income—download the report.

What affects your income when you’re a therapist in private practice?

There’s no cut-and-dried method of determining what you can expect to earn once you launch your private practice, or how much you ought to be earning if your practice is already up and running. 

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But by taking into account the factors affecting your income, you can get a better sense of what to expect. 

Number of clients

More clients means more income. But for every hour you spend with a client, there’s additional time you should be prepared to devote to notes, scheduling, and other administrative tasks. 

Session rate

Your session rate will depend both on what clients in your area typically expect to pay a therapist with your qualifications and what you need in order to earn a sustainable income. It has a direct impact on your income.

Recurring expenses

Rent (whether for an external office, or place in your home dedicated to work), utilities and internet, business insurance, and software subscriptions all take a chunk out of your profits. The less you pay in recurring expenses, the more you can afford to pay yourself.

Your tax bracket

Your tax bracket affects how much you’ll pay in taxes each year. You may be able to qualify for a lower tax bracket (e.g. a lower rate of income tax) by accurately reporting your deductible expenses.

Deductible expenses

Tax deductions reduce your taxable income and lower your tax burden overall. Tracking and reporting them is an important part of therapy practice accounting.

Whether you’re a solo or group practice

Group practices typically earn higher net income than solo therapy practices. But running a group practice comes with its own burdens, including more business expenses and admin work, and the need to register a business structure more complex than sole proprietor.

Business structure

When you go into business on your own, you’re a sole proprietor by default. Registering for a different business structure and filing status—like LLC/PLLC, S corporation, or partnership—usually costs money. But it can also help reduce the tax burden on the portion of your net profit you pay yourself as a salary.

Client insurance

Insurance companies typically reimburse at a lower hourly rate than therapists charge upfront. Jump ahead for a detailed comparison.

Plans for the future

If you’re planning to expand your practice in the future—turning your solo practice into a group practice, for instance—you should be prepared to reinvest some of your net profit as working capital. That could mean paying yourself less while you prepare your practice to grow.

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How private practice therapists overestimate their income

Many therapists new to private practice are dismayed when, after their first year in business, their earnings fall short of what they expected. It’s easy to overestimate your earnings when you fail to take into account factors affecting your income.

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Here are the biggest mistakes therapists make estimating their income and how to avoid them.

Basing your expected income only on your rates

If you charge clients $150 per session, that doesn’t mean you earn the equivalent to someone in a salaried position making $150 per hour, which would be $312,000 per year. You need to take into account expenses when estimating your income. For instance, out of that $150, you might be spending $10 on rent, $7 on software, and so forth. These are important factors to take into account not only when estimating your income but when setting your fees.

Assuming a 40-hour per week caseload

On average, “full-time” self-employed therapists spend 20 to 25 hours per week treating clients. The rest of their time is devoted to administrative tasks, notes, marketing, professional development, and generally just keeping their businesses running smoothly.

Underestimating the cost of overhead

Overhead consists of the expenses you have to pay even if you’re not seeing clients. No matter how long your client list is, for instance, you need to pay for rent, utilities, business insurance, and so on. Be realistic when considering how much each of these expenses will cost you.

Failing to budget for unforeseen expenses

Your work computer decides to call it quits in the middle of a busy week. You get a nasty cold that puts you out of commission longer than you expect. You make a mistake when filing your own tax return, and the IRS charges you a penalty. These are all examples of expenses that can crop up suddenly, and if you don’t have an emergency fund set aside, they cut directly into your profits.

Forgetting about taxes

When you’re an employee, your income tax and FICA (social security and Medicare contributions) are withheld by your employer. When you work for yourself, it’s up to you to withhold those taxes from your income and pay them to the IRS. 

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On top of that, if you’re self-employed you’re required to pay 15.3% self-employment tax on your earnings. Check out our article on how to pay yourself as a therapist for a deeper dive.

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The taxes you’re required to pay could total 30% of your income or more. Don’t forget to take that into account when you’re calculating your future paycheck.

Not reading profit and loss statements (P&Ls)

A P&L is a report generated based on your bookkeeping data telling you how much you’ve earned and how much you’ve spent during a particular period. Regularly creating and examining P&Ls—plus keeping your books up to date—is essential for the financial health of your practice. Without them, it’s easy to let business expenses get away from you, or to fail to anticipate fluctuations in income.

Assuming demand will be high as soon as you go into private practice

It’s true that demand for therapy services is higher than it once was, but that doesn’t mean clients will be knocking down your door the moment you go into business. One of the biggest mistakes you can make is assuming that your practice will grow faster than it really does. Interview other therapists to get a sense of what you can expect in your first year as you build out your client list.

Underestimating client turnover

The rate at which clients move on from your practice is affected by your modalities, the types of clients you’re seeing, and the types of services you provide. Don’t assume that a new client is a never-ending stream of income. 

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According to our 2024 State of Private Practice Report, 43% of therapists typically worked with each client for six to 12 months, while 41% said they typically spent 12 months or longer seeing each client. In total, 58% or respondents said they typically worked with each client for 12 months or less, which is pretty frequent turnover.

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How much do therapists earn in a cash pay practice?

According to our 2024 State of Private Practice Report, 27% of respondents said they were cash pay only, meaning they did not accept insurance. 

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On average, respondents charged $157 per session for therapy, significantly more than the reimbursement rates of most insurance providers.

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Whether or not you accept insurance affects how much you earn. Running a cash-only practice comes with pros and cons.

Pros of running a cash-based practice

• Less admin. No filing claims, not getting paneled with insurance providers. Overall, accepting only cash means less paperwork.
• Higher hourly earnings. You can typically expect to earn more per clinical hour when you only accept cash.
• Faster startup. It’s faster getting your practice off the ground when you aren’t waiting to get paneled or deal with other insurance-related paperwork.

Cons of running a cash-based practice

• Potentially fewer clients. By exclusively accepting cash payment, you make your services unavailable to clients who may only be able to afford therapy thanks to insurance.
• Less marketing support. Since you’re not getting in-network referrals from insurance companies, you may get a slower influx of new clients than you would otherwise.

How much do therapists earn when they accept insurance?

Reimbursement rates from insurance companies vary from one company to another. They also vary according to your location. Our 2024 State of Private Practice Report shows that reimbursement rates are higher in some states than they are in others.

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According to the report, the highest-reimbursing insurance company for therapists was Aetna, with an average reimbursement of $141 per hour. In contrast, Humana reimbursed therapists at an average rate of $96 per hour.

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Here are some pros and cons of accepting insurance.

Pros of accepting insurance

• More clients can afford your services. By accepting insurance, you make your services affordable to clients who might be unable (or unwilling) to pay for it if they were without insurance.
• Steadier influx of clients. In-network referrals can help bring in a steadier stream of new clients, reducing the need for other marketing efforts.
• Competitiveness with other therapists. If most other private practice therapists in your area accept insurance, but you do not, you could end up losing clients to them. In some cases, accepting insurance helps you remain competitive.

Cons of accepting insurance

• More admin. Billing, filing claims, and getting paneled all demand time and energy, and result in a greater burden of paperwork.
• Lower earnings. Reimbursement rates from insurance companies are typically lower than what you could expect to earn charging clients upfront.
• Slower to get off the ground. If you’re waiting to get paneled before you launch your therapy practice, it could mean a wait of a few weeks to a few months while you go through the process.

Most common expenses for private therapy practices

The top business expenses reported by therapists in the 2024 State of Private Practice Report were professional development, software fees, and rent.

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Almost three quarters of therapists (72%) reported having total expenses of less than $25,000 per year, and 18% said their expenses totalled $25,000 to $50,000.

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Expenses have a major impact on your income as a self-employed therapist. But they don’t necessarily scale with your business. It’s possible for a practice earning $125,000 per year to have annual expenses similar to one earning $40,000. 

How to set your session fees

Setting fees for your private practice isn’t always straightforward. Get a jump start with help from Heard’s fee-setting calculator for therapists.

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Figuring out how to pay yourself as a therapist? Not sure whether to put yourself on the payroll or take an owner’s draw? Check out our complete guide to paying yourself as a therapist.

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post.

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Bryce Warnes is a West Coast writer specializing in small business finances.

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