As December and the end of the year are quickly approaching, tax season is almost upon us! What does that mean? It means it is 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 is your first year as a physical therapy business owner, have no fear, as below you will find an overview of some of the most common tax deductions for physical therapy businesses.
Disclaimer: Some of these deductions might not apply to your business, depending on how you file as a business entity for taxes, so make sure to consult with a certified tax professional and/or accountant prior to implementing any of the below suggestions.
- Marketing/Advertising: According to several different websites, marketing is the best tax deduction as it is usually 100% tax deductible, provides continued community exposure and ultimately leads to new or continued revenue through increased patient caseload. These expenses can include both print and online services, including, but not limited to: paying for updates to your website, purchasing online marketing platforms, such as social media, patient education brochures, newsletters, or print materials for advertising in the clinic. Plus, if you have a marketing plan in place for 2021, then you can purchase materials this year to implement that advertising strategy next year and write it off on your 2020 taxes.
- Rent Payments and Utilities: If you own a physical therapy business which has required you to rent/lease an office space this year, then make sure you include it in your taxes! Monthly rent payments are one of the biggest tax deductions for private practice owners. For utilities, your monthly electricity bill and your business phone line expenses can be deducted from your taxes for increased savings.
- Taxes and Licenses: If you are offering any type of physical therapy services in your community, then you are likely paying for a city business license to legally operate your business. Lucky for you, that city business license payment can be used as a tax deduction each year to help with costs. Also, if you had to renew your physical therapist license this year, you can also include that fee as a tax deduction. One thing to note is that original license fees, meaning your first physical therapist license fee in each state, cannot be used as a tax deduction.
- EHR Software (such as HelloNote): Every physical therapy practice has to have a documentation/billing system in place, otherwise you would not be able to treat and bill patients. Whether you just started your business this year or have been in business for a few years, you can typically include the cost of your EHR software as a tax deduction for the year.
- Business Car Mileage and Maintenance: Do you own a home health physical therapy business or do you work as an independent home health contractor? If so, then this one is for you as mileage and maintenance on the car you travel in to see your patients is one of the most popular tax deductions, in this particular setting.
- Office Supplies: Any office supplies you have bought this year for your practice can also be used to save you money on your taxes. Items such as: cleaning supplies (this is a big one for 2020!), postage, pens, paper, staplers, printer ink, etc. are all things that should be included in the tax deduction section of your tax filing.
- Liability Insurance: Most physical therapy businesses will have some type of professional liability coverage for their employees as added protection and to reduce any potential legal fees, in case something goes wrong. If you pay for professional liability insurance to cover your practice, then you can also deduct this expense from your taxes.
The above is by no means an exhaustive list of potential tax deductions for physical therapy business owners, but rather a suggestion list as examples of expenses that are usually identified as being tax write-offs. While owning a physical therapy practice or being an independent contractor can sometimes be seen as being an expensive venture, oftentimes tax deductions are a huge help. Finally, one best practice tax tip is to always keep your receipts, for the entire year, in a place where you can easily find them, so that you do not miss out on any possible deductions when it is time to file taxes for your business.