Clinical supervision for practicing therapists does not come cheap.

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If you need to pay for clinical supervision in order to keep your license as a therapist, social worker, or psychologist, you can expect to pay fees close to the cost of your hourly rate. 

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For part-time practitioners, or new solo therapy practices just getting established, the annual cost of clinical supervision can take a significant chunk out of your bottom line.

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Good news, though: In most cases, the cost of that clinical supervision is a tax write-off. Here’s when and how you can take advantage of it.

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When is clinical supervision tax deductible?

Business expenses are tax deductible when, in the words of the IRS, they’re “ordinary” and “necessary.”

What is an ordinary and necessary expense?

An expense is “ordinary” when you might reasonably expect to incur it in the course of doing business. 

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For instance, an ordinary expense for a group therapy practice would be the cost of furnishing a client waiting area. A non-ordinary expense would be the cost of renting an inflatable bouncy castle.

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An expense is “necessary” if it’s helpful for your business—that is, it helps you earn revenue. A necessary expense does not have to be indispensable, but it should still conceivably be able to benefit your business.

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For example, you may not 100% need a ring light and microphone in order to do telehealth sessions with clients. But buying and using them will improve the client experience, potentially help you retain clients, and ultimately aid you in earning an income. So it’s a necessary expense.

When is the cost of supervision ordinary and necessary?

Clinical supervision is ordinary and necessary when you need it in order to keep your therapist’s license, or any other certification necessary for staying in business and offering the same quality of care to clients.

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In most cases, that makes it tax deductible. Clinical supervision is ordinary because others in your field also typically pay for it. It’s necessary because it allows you to earn revenue. It’s hard to earn revenue if you lose your license and go out of business.

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As with all tax deductions, it’s strongly recommended that you consult with an accountant before claiming it on your tax return. They can confirm that you’re eligible to deduct the expense, and help insure you have all the records you need on hand in case you’re audited and you need to back up the claim with proof of purchase.

When is clinical supervision not tax deductible?

Generally, clinical supervision is not tax deductible if you’re paying for it as part of your education as a therapist.

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When it comes to claiming the cost of education as a tax write-off, the IRS is fine with continuing education: training or lessons to maintain your professional certification, or upgrade your level of certification within your field. 

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However, the cost of education you receive in order to become certified in your field and start earning an income is not tax deductible.

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After all, if you’re in school, training to become certified, and you are not yet earning income as a therapist, you’re not technically in business—so you can’t claim the cost of your education as a business expense.

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Bottom line: The cost of clinical supervision while you are training to become licensed as a therapist is not tax deductible. Any additional supervision you need in order to keep your license and stay in business, however, is.

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How to deduct clinical supervision on your tax return 

The form you use to claim the cost of clinical supervision depends upon your private practice’s business structure.

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• Filing as a sole proprietor, or if you’re a partner in a partnership, you claim it on Schedule C of Form 1040.
• If you’re filing as an S corporation, you claim it on Form 1120-S. 

Remember: Save your receipts!

In the event you’re audited by the IRS, auditors can comb through your past six years of returns in search of false tax claims.

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If you can’t prove you’re incurred an expense, the IRS considers it a false tax claim. As a result, you may be forced to pay hefty fines, in addition to the outstanding tax you owe.

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To be safe, keep all records of clinical supervision on file for a minimum of six years. That includes all invoices and receipts given to you by the supervising party—whether it’s an individual or an agency.

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Remember to consult with your accountant before claiming any tax-deductible expenses on your return. They can help you make sure you’re eligible to do so, so you don’t run the risk of incurring IRS fines.

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Looking for more ways to potentially reduce your tax bill? Our complete list of tax deductions for therapists is the place to start.

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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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