Your physical therapy practice can reduce its tax burden by carefully and accurately claiming deductions. But in order to do that, you need to understand which expenses are deductible, and ensure you keep records of each expense in case of an audit.

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This list includes every tax deduction typically claimed by physical therapy practices—from small solo practices to clinics employing multiple practitioners.

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Remember: Recordkeeping is key

No matter how carefully you track your practice’s expenses with Heard or another financial solution, you should not plan to claim an expense on your taxes unless you also keep receipts on file. 

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As a widely recommended best practice, hold on to receipts for expenses of $75 or more.

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In the event of an audit, the IRS will require receipts for every significant deduction you have claimed. A receipt proves a deduction is legitimate. If you can’t produce one, you’ll be liable for the amount you originally claimed as a deduction, and you may also be charged fines.

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If the IRS audits you, they can request supporting documentation going back up to six years. So keep receipts for all your occupational therapy practice’s expenses organized and carefully stored for at least that long.

The standard deduction vs. itemized deductions vs. deductible business expenses

Two types of deductions reduce your tax burden when you run your own business: personal deductions and business deductions.

Personal deductions 

Personal deductions apply to you, personally, and not to your business. You report them on Schedule A (Form 1040).

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You file your personal deductions either by itemizing them or by claiming the standard deduction.

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Itemized deductions include expenses like mortgage interest, real estate taxes, property taxes, as well as medical and dental fees. They also include state and local tax (SALT). 

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Rather than itemizing these deductions, you may choose to claim the flat-rate standard deduction. Starting in 2025, the standard deduction for single filers is $15,750.

Business deductions

Business deductions have to do with the operation of your business, not your activities as an individual. 

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You report business deductions on:

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• Schedule C (Form 1040) if you’re a sole proprietor or an LLC filing as a pass-through entity
• Form 1120 if your business is a C corporation
• Form 1120-S if your business is an S corporation
• Form 1065 if your business is a partnership or an LLC filing as a partnership (with each partner filing a Form 1040 separately)

Can you claim both the standard deduction and business deductions?

You can absolutely claim both the standard deduction and itemized business deductions. 

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But many practice owners new to filing business taxes get confused about the two types of deduction.

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Since they may either claim the standard deduction or itemized deductions, they believe that they also have to choose between the standard deduction and business deductions.

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However, the standard deduction applies to your personal taxes, while business deductions apply to your business taxes. 

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If you’re a sole proprietor or an LLC filing as a sole proprietorship, you report all your business tax deductions Schedule C (Form 1040). If you file as a corporation or partnership, you report business deductions on your corporation or partnership return. 

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Your standard deduction or itemized deductions, on the other hand, go on Schedule A (Form 1040).

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No matter which personal deductions you claim, or how your business is structured, you can claim tax deductions for your business.

Advertising and marketing

The cost to market or advertise your physical therapy practice is 100% tax deductible.

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Expenses you can claim include:

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• Mail or print ads
• Online advertising 
• Website design and updates
• Professional headshots
• Logo design
• SEO tools
• Business cards 
• Brochures
• Sponsorships
• Promotional items like keychains, calendars, or mugs
• Monthly fees to list your practice in online directories

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But there are a few exceptions:

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• Signage: Any sign you put to use for one year or longer must be deducted as a depreciable asset. (More on that below.) A temporary sign used for less than one year may be written off as a marketing and advertising expense. 
• Vehicle ads: While you can deduct the cost of putting promotional materials for your practice on your vehicle, other costs like fuel or maintenance should be filed as vehicle deductions.
• Recruitment: If you pay to post job positions, the cost is tax deductible, but not as an advertising expense.

Accounting and bookkeeping

Accounting and bookkeeping are essential for tracking finances and filing taxes for your physical therapy practice. You can deduct 100% of their cost from your taxes.

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That includes money you spend on:

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• An accountant (whether kept on retainer or hired only for tax prep)
• A bookkeeper
• A tax advisor
• Accounting software
• Financial management tools like Heard

Business meals

If a business meal qualifies as a business expense, you may deduct 50% of its cost front our taxes.

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In order for the meal to qualify, you must:

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• Purchase it from a qualifying establishment. Typically this means a restaurant with either takeout or sit down service. Ingredients for meal preparation, or food purchased for anything other than immediate consumption, do not qualify.
• Purchase it during a business trip or share it with a business associate. (More on business travel deductions below.)
• Make sure the meal is not “lavish or extravagant under the circumstances.” Salad and soup would qualify. A nine-course meal with wine pairings would not.

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Unless you purchase the meal while travelling for work, it should be shared with a qualified business associate.

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In the words of the IRS, a business associate is “a person with whom the taxpayer could reasonably expect to engage or deal in the active conduct of the taxpayer's trade or business such as the taxpayer's customer, client, supplier, employee, agent, partner, or professional adviser, whether established or prospective.”

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If you intend to deduct a business meal, be sure to keep the following information for your records:

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• The total cost
• The date of the meal
• The location
• The business purpose of the meal
• Who was present at the meal

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In the event of an IRS audit, you will need this information in order to justify your tax deduction.

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Business travel

If you travel in order to:

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• Treat clients at their home or care facilities
• Work in a clinic or a hospital as part of a business contract
• Attend a conference 
• Give a talk, teach a class, or facilitate a workshop

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…you are able to deduct some of the cost of travel.

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To qualify for the business travel deduction, your trip must:

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1. Take you outside your tax home (the place where your business is based).
2. Take you away from your tax home for longer than one work day.
3. Mostly be spent doing business. For instance, if you go away for four days, and you spend three of those days at a conference, and the fourth day sightseeing, it counts as a business trip. Reverse that—spend three days sightseeing, and one day at a conference—and it’s not a business trip.
4. Be “ordinary and necessary.” The IRS is on the lookout for businesses claiming luxuries as tax deductions. For example, If you have the choice between flying First Class or Economy, choosing First Class could stretch the limits of “ordinary and necessary.”
5. Be planned in advance. The IRS aims to prevent business owners from tacking on professional activities to recreational trips so as to claim vacations as business expenses. Prepare a written itinerary and travel plan, and book transportation and lodging well in advance. That helps to prove the trip is primarily business related.

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You can deduct the cost of travel to your destination, and the cost of lodging once you arrive. You can also deduct:

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• Baggage fees
• Rental car costs
• Laundry and dry cleaning
• 50% of business meals (i.e. with business associates) from qualifying establishments 
• 50% of meals eaten, while traveling, at qualifying establishments

Bank fees

Two types of bank fees may be deducted from your business taxes:

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1. Overdraft fees
2. Maintenance fees

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Overdraft fees are only incurred when you overdraw an account, while maintenance fees are charged monthly. You can record them in your books as a regular expense and deduct them on your tax return.

Vehicle use

If you frequently drive places in order to treat clients as a physical therapist, you can deduct the cost of using and maintaining your vehicle.

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Note: “Business activities” do not include your regular commute to work. You must be travelling to a destination different from your primary business location in order to qualify.

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Travelling to a client’s home or care facility would qualify you for the vehicle use deduction. Driving to your own clinic would not.

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There are two ways you can calculate your vehicle use tax deduction: by mileage rate or by actual expenses.

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If this is your first year using your vehicle for work, you can file your deduction using either the mileage rate method or the actual expenses method. However, if you use the actual expenses method the first year you claim the vehicle use deduction, you must continue to use it for the life of the vehicle.

Mileage rate

To deduct your vehicle expenses using the mileage rate method, first calculate the total number of miles you traveled for work. Then multiply the total number of miles by the IRS mileage rate for the tax year. 

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For 2025, the mileage rate was 70 cents per mile.

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Using the mileage rate method, you can’t include any other expenses such as oil changes or routine maintenance and repairs in your deduction. But you may deduct the cost of parking fees or tolls.

Actual expenses

To write off actual expenses: 

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1. Calculate how much of your time on the road is devoted to business
2. Multiply your business use percentage by all your vehicle expenses for the year

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‍For instance, if you drove 20,000 miles last year, and 2,000 of the miles you travelled were spent travelling to clients’ homes or care facilities, you could deduct 10% of your total vehicle expenses.

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Eligible vehicle expenses include:

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• Fuel
• Lease payments
• Oil and other fluids
• Parking fees
• Garage or parking space rental
• Repairs
• Tire replacement
• Licenses and registration
• Insurance
• Depreciation on the vehicle

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Whichever method you use to deduct vehicle expenses, be sure to keep detailed records. 

Membership fees

Membership fees for professional organizations are tax deductible.

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Examples include the American Physical Therapy Association (APTA) and the American Academy of Orthopaedic Manual Physical Therapists (AAOMPT).

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You can also deduct the cost of membership in your local chamber of commerce, plus membership in any public or civic organizations related to physical therapy.

Continuing education

You can deduct the cost of courses, workshops, and certification programs related to physical therapy. To do so, the education you pay for must meet at least one of two criteria:

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1. It helps you improve upon or maintain the skills you need to work as physical therapist
2. It’s required in order for you to maintain your certification as a physical therapist

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You can’t deduct the cost of any education necessary to meet the minimum requirements to become a physical therapist. 

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For instance, the schooling you complete so you can become certified as a physical therapist in your state is not tax deductible. But any additional training you do after you’re certified is most likely tax deductible.

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You also can’t deduct the cost of education you undertake in order to change professions.

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For instance, if you’re currently a physical therapist but you decide to return to school and become an occupational therapist, you can’t deduct the cost of education from the taxes for your physical therapy practice. 

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Some more education costs you can deduct:

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• Books, journals, and trade magazines related to physical therapy
• Learning supplies (stationery, note-taking apps, etc.)
• Supervision 

Rent (including home-based businesses)

The cost of renting a space for your physical therapy practice is tax deductible. The cost of utilities (heat, water, electricity, internet, phone) is also deductible.

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If you work from home, you may deduct a portion of your mortgage payments or rent, as well as utilities, with the business use of your home deduction.

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In order to qualify for this deduction, you must use your home-based work space:

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• Exclusively, meaning the place where you work is distinct from the rest of your house. This may be a separate room in your home, or a portion of a room. The primary use of the area should be for providing physical therapy.
• Regularly, meaning you keep recurring work hours. If you use your desk on random occasions to catch up on emails, it does not qualify as a home office. 
• With precedence, meaning it’s your primary place of business. For instance, you don’t spend 90% of your working hours at your clinic, then use your spare room to do paperwork. 

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If you qualify, you may deduct a percentage of your home’s rent or mortgage payments, plus the cost of utilities (including routine repair and maintenance), that corresponds to the percentage of your home you use for your occupational therapy practice.

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There are two ways to claim this deduction: with the business use of your home regular method or with the simplified method. 

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Before choosing one, do the math: depending on your circumstances, one method may result in a bigger tax write-off than the other.‍

‍The business use of your home regular method‍

To calculate your home-based business deduction using the regular method: 

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1. Determine the square footage of your workspace‍
2. Calculate the square footage of your entire home
3. Divide your workspace square footage by your home’s square footage

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The resulting percentage is the amount you can claim on your tax return as a business use of your home.

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For instance, if your workspace were 100 square feet, and your entire home were 2,000 square feet, the calculation would look like this:

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‍100 / 2,000 = 0.05 or 5%

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Following this example, you could deduct 5% of your combined mortgage payments/rent and utilities for the year. 

The business use of your home simplified method‍

Rather than calculating the percentage of your home you use for work, the simplified method deducts a flat rate per square foot.

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With the simplified method, you can deduct $5 per year for each square foot of your home you use for business, up to a maximum of 300 feet.

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Business equipment and supplies

The cost of any item you use to run your business or treat clients is a tax deductible expense.

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That includes general purpose and office equipment like:

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• Printers, photocopiers, and phones
• Printer or photocopier ink or toner 
• Printer paper
• Furniture
• Office artwork
• Storage bins

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It also includes items specific to physical therapy, like: 

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• Assessment and diagnostic tools, including goniometers, dynamometers, algometers, reflex hammers, and tape measures
• Electrotherapy and pain management devices, including TENS units, EMS machines, ultrasound therapy machines, IFT machines, and laser therapy machines
• Rehabilitation and mobility aids, including parallel bars, walking aids, exercise balls, resistance bands and tubes, balance boards, and CPM machines
• Manual therapy tools, including foam rollers, massage guns, cupping therapy sets, and kinesiology tape
• Strength and conditioning equipment, including therabands and theraputty, weights, pulley systems, and stationary bikes and treadmills
• Recovery accessories, including hot and cold packs, compression garments, and orthopedic pillows and supports
• Specialized equipment, including cervical and lumbar traction devices, hydrotherapy tanks, VR rehabilitation systems, and PEMF devices

Employee and contractor salaries, wages, and benefits

If you have employees on payroll, or if you hire contractors, the cost of wages, fees, and salaries is 100% tax deductible.

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You can also deduct the cost of employee benefits, including:

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• Contributions to retirement plans
• Health insurance premiums, provided at least 70% of employees are insured
• Paid leave, provided it is part of a formal company policy

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Also, fringe benefits like life insurance premiums, childcare assistance, and educational assistance programs may also be deductible so long as they meet IRS requirements. 

Square, Stripe, and other payment processor fees

If you use Square, Stripe, or other payment services to collect funds from clients, the fees charged by the payment service are 100% tax deductible.

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‍This deduction applies both to flat monthly fees you pay to use these services and to any percentages of your revenue they collect.

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Check the app for the service you use. Most offer reports telling you how much you paid in fees each year.

Booking and billing software

Subscription costs of software you use for booking client appointments is 100% tax deductible. So is software you use to invoice clients or provide them with receipts.

Electronic health record (EHR) tools

The cost of EHRs or practice management tools is 100% tax deductible as a business expense.

Professional liability insurance

Professional liability insurance protects your physical therapy practice from claims of malpractice or negligence in the rendering of professional services.

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Provided it is considered an ordinary and necessary business expense for your profession, professional liability insurance is considered tax deductible. If you’re not sure whether professional liability insurance is ordinary and necessary, consult with your licensing board or professional organization.

General liability insurance

While professional liability insurance protects you from malpractice claims, general liability insurance protects your business from damage to your property and claims of bodily harm.

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As with professional liability insurance, the cost of general liability insurance premiums are tax deductible. Make sure to document all payments you make and keep records of your receipts.

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Student loan interest

The principal of your student loans is not deductible. 

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Some good news, however: you may be able to write off the interest.

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If you pay over $600 in interest during the course of the year, you can claim the expense on your tax return. But you can only claim this deduction if your adjusted gross income (AGI) is $85,000 or less, and the maximum amount you can write off each year is $2,500.

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Technically, this is not a business expense. It’s an itemized personal deduction, meaning you claim it on your personal tax return. But it can help to take the sting out of monthly student loan payments.

The Qualified Business Income (QBI) deduction

Taking advantage of the QBI deduction, you can deduct up to 20% of your income from your taxes. Your physical therapy practice likely qualifies for the full QBI deduction if:

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• It’s a pass-through entity (a sole proprietorship, an S corporation, a partnership, or an LLC filing as either of those business structures)
• Its taxable income for the year is $182,100 or less 

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If you earn in excess of $182,100, you may qualify for a partial deduction.

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There are a few more factors to take into account before claiming the QBI deduction. Check out our article on the QBI deduction for therapists—it applies not only to therapists but to most health and wellness businesses.

Pass-through entity tax (PTET)

If your practice is a pass-through entity like an S corporation or a partnership, and you operate in a state with pass-through entity tax (PTET), you may be able to deduct state and local taxes as a business expense.

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Individual tax filers can deduct the cost of state and local taxes using the state and local tax (SALT) deduction. But this deduction has a cap: from 2025 to 2029, the cap is $40,000; after 2029, it’s scheduled to revert to its previous $10,000 limit.

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The majority of states allow pass-through entities to pay PTET as an alternative to SALT. Since it is deducted on your business tax return—not your individual tax return—PTET has no limit. 

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Consult with your Secretary of State to find out whether you are eligible for PTET, and work with an accountant to determine the best strategy for your practice.

A note on depreciating business assets

Some equipment or tools you purchase for your occupational therapy practice may qualify as depreciable assets.

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A depreciable asset is any fixed, tangible business asset with a useful life of 12 months or more:

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• “Fixed” means it’s not easily converted to cash, and you put it to long-term use as part of your business as a physical therapist.
• “Tangible” means it has a physical presence (e.g. a TENS unit is tangible, but your website is not).
• “Useful life” is the amount of time an asset can be put to use before it wears out or becomes obsolete.

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When you depreciate an asset, you deduct the total cost of purchasing it over multiple years according to its amortization period. 

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Different types of assets have different amortization periods. Typically, an item with a longer useful life will have a longer amortization period.

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Businesses usually only depreciate large assets, not small ones. For instance, it may make sense to depreciate a $16,000 hydrotherapy tank, but it does not make sense to depreciate a $30 balance board.

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One of the benefits of depreciating an asset on your tax returns is that you can claim the maximum deduction possible. That’s because the maximum amount you can deduct from your taxes in a given year is limited by the amount you owe. 

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Before purchasing any major assets for your business, consult with an accountant to determine a depreciation strategy that works for you.

Key takeaways

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• Tax deductions take the form of either personal expenses (certain costs related to you as an individual) or business expenses (costs related to your business)
• Keep receipts for every business expense you deduct on your taxes so you can back up your claims in the event of an IRS audit.
• Physical therapy practices typically qualify for the QBI deduction; it’s worth your time to find out whether you can claim it
• If you purchase a large fixed asset, in order to reap the most tax benefits, you should depreciate the expense
• Consult with a qualified accountant before claiming any business expenses you’re unfamiliar with, or for help depreciating large assets or claiming pass-through entity tax (PTET)
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First year filing taxes for your therapy practice? Check out our article on tax planning 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 his or her 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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