Guide to tax deductions for physical therapy business owners. Maximize savings with tips on marketing, rent, utilities, and liability insurance.
As December and the end of the year are quickly approaching, tax season is almost upon us! What does that mean? It means it’s time to start collecting and preparing any expenses throughout the year that can be claimed as deductions for your physical therapy business.
If taxes overwhelm you or it’s your first year as a physical therapy business owner, have no fear. Below, you’ll find a detailed overview of some of the most common tax deductions available to physical therapy businesses, along with practical examples and tips to maximize your savings.
Disclaimer: Some of these deductions might not apply to your business, depending on how you file as a business entity for taxes. Always consult with a certified tax professional or accountant before implementing any of the suggestions below.
Marketing and Advertising
Marketing is one of the most beneficial tax deductions for small businesses, as it’s typically 100% tax-deductible. This expense not only helps you save money during tax season but also boosts community awareness and drives patient caseloads.
Examples of deductible marketing expenses include:
- Paying for website updates or new design features.
- Purchasing online ad space on platforms like Google Ads or Facebook.
- Printing physical brochures or newsletters for patient education.
- Running local radio or TV advertisements.
Pro Tip: Planning for next year? Purchase marketing materials in December for use in January and deduct them on this year’s taxes. For example, if you spend $1,000 on digital ads in December for a January campaign, you can deduct the full amount on your current year’s return.
Rent Payments and Utilities
If you rent or lease office space for your practice, monthly rent payments are a significant tax deduction. According to the National Federation of Independent Business (NFIB), rent accounts for 10-15% of typical small business expenses—making it a substantial write-off.
Deductible utilities include:
- Electricity bills.
- Water and heating costs.
- Business-specific phone and internet services.
Example Calculation:
If your annual rent totals $24,000 and utilities cost $3,600, you can claim up to $27,600 in deductions.
Taxes and Licenses
Any fees associated with running your business, such as city or state business licenses, are deductible. Additionally, annual renewal fees for professional licenses, like a physical therapist license, can also be written off.
Important Note: Original license fees (e.g., your first state PT license) are not deductible.
Example:
If your city business license costs $250 annually and your PT license renewal is $200, you can deduct $450 from your taxable income.
EHR Software
Every physical therapy practice needs reliable documentation and billing software. Whether you’re subscribing to a cloud-based system or using licensed software, these expenses are often tax-deductible.
Examples of deductible software-related costs:
- Monthly subscription fees for EHR systems.
- Initial setup fees for onboarding software.
- Costs for software updates or additional features.
Industry Data: The average cost for EHR software ranges from $99 to $499 per provider, per month, depending on features and scalability. Over a year, this could mean a deduction of $1,200 to $6,000 or more.
Business Car Mileage and Maintenance
If you offer home health services or make frequent trips for business purposes, mileage and car maintenance can be significant deductions.
Mileage Deduction for 2023:
The IRS standard mileage rate is 65.5 cents per mile for business use.
Example Calculation:
If you drove 5,000 miles for work in 2023:
5,000 miles × $0.655 = $3,275 deduction
Other deductible car-related expenses:
- Oil changes and maintenance.
- Insurance premiums (percentage used for business).
Office Supplies
From basic stationery to essential cleaning materials, most office-related purchases are tax-deductible.
Examples of deductible supplies include:
- Cleaning supplies (especially important for infection control).
- Printer ink, paper, and mailing supplies.
- Furniture like desks and chairs, if purchased specifically for the practice.
Pro Tip: Save receipts for every purchase, no matter how small. Over time, these minor expenses can add up to significant deductions. For instance, spending $500 annually on cleaning supplies alone is worth noting.
Liability Insurance
Professional liability insurance is a must-have for physical therapy practices. Fortunately, these premiums are deductible.
Example:
If your annual liability insurance premium costs $1,500, you can deduct the entire amount.
Why It’s Important: Liability insurance protects your business from legal risks, ensuring financial stability in case of unexpected claims.
Tax Filing Best Practices
While these deductions can save you significant money, proper organization and preparation are essential to make the most of them.
Tips for Success:
- Use Accounting Software: Platforms like QuickBooks or Wave make it easy to track expenses and generate reports for your accountant.
- Keep All Receipts: Store receipts digitally or in a designated folder to avoid scrambling for proof during tax season.
- Consult a Professional: A tax accountant familiar with healthcare businesses can identify deductions you might overlook.
Did You Know?
According to the IRS, small businesses save an average of $12,500 annually by properly claiming deductions.
Final Thoughts
Owning a physical therapy practice comes with its challenges, but tax deductions can ease the financial burden. From marketing and utilities to EHR software and liability insurance, these write-offs are powerful tools for optimizing your tax return.
Remember, staying organized and seeking professional advice ensures compliance and maximizes savings. Start preparing now to make this tax season stress-free and rewarding!