The cost of going to therapy may be tax deductible for both clients and for therapists attending therapy sessions themselves.

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‍If you’re a client, there are particular requirements you need to meet so you can deduct therapy on your tax return. 

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If you’re a therapist paying for personal therapy, then you need to meet fewer requirements. However, since you’re deducting therapy as a business expense, you should follow best practices to ensure you don’t run afoul of the IRS.

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First, we’ll look at how therapy deductions differ between private individuals and therapists. Then, we’ll cover what you need to know to make sure your therapy sessions qualify as tax deductions, and how you can list them on your return.

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The difference between personal and professional therapy tax deductions

Whether you’re a private individual paying for therapy, or a professional therapist, you may only deduct the cost of therapy from your taxes if you pay for it out of pocket. Therapy covered by medical insurance is not eligible.

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However, that’s where the similarities end.

Deducting the cost of therapy as a private individual (non-therapist)

Private individuals are only able to deduct the cost of therapy from their taxes if the total cost of therapy for the year exceeds 7.5% of their adjusted gross income (AGI).

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‍The therapy must also be part of a medical treatment, though the IRS is pretty vague about what that means. Rule of thumb: if the therapy is necessary, and deals with specific issues that negatively impact one’s life, it’s probably deductible.

Deducting the cost of therapy as a professional therapist

As a self-employed therapist, you do not need to meet the same minimum threshold as individuals (7.5% of AGI) in order to deduct the cost of therapy.

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At Heard, we believe any form of treatment which helps you to do your job as a therapist well, and allows you to continue doing it well, is considered a tax deductible business expense.

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With that said, many accountants have differing viewpoints on whether or not this counts as a write off, so be sure to check with a tax professional here.

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‍You may see a therapist to help you navigate job-related issues: the emotional burden of supporting your clients, work-life balance, or even ethical dilemmas you face in your work.

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‍You may also see a therapist in order—at least partly—to keep you grounded in the client experience, so you never lose touch with how it feels to occupy “the other chair.” 

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‍Finally, you may see a therapist in order to navigate your own, personal challenges: anxiety and stress, difficult relationships, or trauma. 

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At the end of the day, your practice’s number one asset is you. Any kind of therapy that helps you stay healthy and function well as a human being benefits your business. That’s why it’s a valid business expense, and tax deductible.

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‍Finally, if you need to travel in order to attend therapy, you can deduct it on your taxes as a business travel expense.

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Best practices for deducting the cost of therapy

If you’re planning to deduct the cost of therapy as a business expense, there are a few best practices you should follow in order to accurately file your taxes and avoid running into trouble with the IRS.

‍Enter the expense in your books 

Since therapy is a business expense, it needs to be entered in your general ledger—either by you (if you do your own bookkeeping) or by your bookkeeper. You may have a specific “Therapy” account in your chart of accounts, or you may include it under a different account. 

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This not only ensures your bookkeeping is accurate, it will make it easier during tax time for you or your accountant to calculate the total amount your business spent on therapy for the year.

‍‍Keep your receipts 

As with all deductible business expenses, you’ll need to provide evidence in the case of an audit. Receipts are that evidence. For any therapy sessions you deduct on your tax return, plan to hold on to receipts for at least six years (the maximum statute of limitations on tax returns).

‍When in doubt, check with your accountant‍

To reiterate: just about any type of psychotherapy that helps you do your job well may qualify as a business expense. But if you have doubts about a particular course of therapy, double check with a qualified accountant or tax advisor.

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They can give you the final word on whether your therapy counts as a business expense.

How to deduct therapy on your tax return (Form 1040 or Form 1120S)

How you deduct therapy on your tax return varies according to whether your business is a sole proprietorship or an S corporation.

Deducting therapy expenses as a sole proprietor

To deduct the cost of therapy as a sole proprietor, list it as an expense on Schedule C of IRS Form 1040.

Deducting therapy expenses as an S corporation

On IRS Form 1120S, enter the total amount of “Other Deductions” (which includes therapy) on Line 19. In a separate, attached statement, include a breakdown of all these “Other Deductions,” including your therapy expense. 

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‍You should identify your therapy expense on this attached statement as “Code S.” If this is your first year filing as an S corporation, it’s a good idea to get help from a qualified accountant.

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The cost of therapy is just one of many expenses therapists tend to overlook while filing their taxes. For a complete rundown of all the deductions you can take advantage of this tax season, get our complete guide to tax deductions for therapists.‍

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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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