The education expense deduction for therapists may be able to lower your tax bill, provided you qualify for it.
Not all education expenses are treated the same way by the IRS, and claiming a deduction you don’t qualify for could lead to penalties.
Before you claim the education expense deduction for your therapy practice, here’s everything you need to know.
What is the education expense deduction?
If you’re self-employed, the education expense deduction allows you to claim on your tax return the cost of professional education in your field.
“In your field” is a key term here. Surfing lessons, cooking classes, or your weekly novel-writing workshop don’t qualify.
What’s more, if you decide you’d rather be an electrician than a therapist, you can’t claim the cost of night classes at the local trades school on your tax return. All education you deduct must be relevant to your current field. The IRS explicitly states that you can’t claim the cost of getting an education in order to enter a new field of work.
The litmus test is whether the education you’re paying for will help you earn more money doing your work as a therapist. If the answer is “yes,” there’s a good chance you qualify for the deduction.
With one important caveat:
The education expense deduction does not cover the cost of meeting the minimum requirements to practice in your field.
For instance, to be licensed as a professional counselor in California, you need a master’s degree in counseling or psychotherapy. The cost of getting that master’s degree is not tax deductible.
Whatever additional therapist education you undertake after meeting the minimum requirements to practice is likely to qualify as tax deductible. This includes:
- Professional conferences
- Clinical trainings
- Seminars and workshops
- Online courses
What expenses does the education expense deduction cover for therapists?
Most expenses you incur in the process of receiving qualified continuing education as a therapist are tax deductible.
That includes the cost of:
- Tuition, books, and supplies
- Other expenses (hiring tutors, typists, or researchers)
- Travel expenses (sometimes)
In order to deduct travel expenses—car mileage or the cost of transit—you must be completing a short course of education while working full time. There’s some gray area here, so consult with an accountant before trying to claim these expenses.
The IRS recognizes that it isn’t always easy to determine whether costs associated with education qualify for the education expense deduction. They provide an automated interview to help you figure out whether the expenses you want to claim are valid.
Are student loan payment tax deductible for therapists?
To put it briefly: No. You cannot deduct your student loan payments on your tax return.
So long as getting your post-secondary degree or degrees was a necessary part of meeting the minimum requirements to practice as a therapist, the cost of tuition does not qualify for the education expense deduction.
Also, in effect, you’re paying for the cost of education expenses you incurred before you were ever a self-employed therapist, eg. before you were able to claim education as a professional expense in the first place. It’s a catch-22.
However, if you were hoping to write off the cost of student loans on your tax return, there is a very thin silver lining: You might be able to write off interest payments on your loan.
How therapists can write off student loan interest payments
If you paid over $600 interest on student loans the previous year, your lender is required to send you a Form 1098-E. It lists the total amount you paid.
You can write that amount off as an adjustment to your adjusted gross income (AGI) on your personal tax return.
You’re limited to a maximum write-off of $2,500 per year, and you only qualify if your MAGI (modified AGI—your AGI with some deductions factored back in) is less $85,000 or less.
This isn’t a business expense deduction. It’s an above-the-line deduction on your personal return. But it’s better than nothing.
Can therapists deduct the cost of training in new types of therapy?
You know already that you can’t deduct the cost of training to enter a field different from therapy. But what about education outside your main focus as a therapist?
For example, say you run your own practice in California. You already have a master’s degree in counseling, allowing you to qualify as a professional counselor. But you decide to pursue a second degree, a master’s degree in marriage and family therapy, so you can become a Licensed Marriage and Family Therapist (LMFT).
Can you deduct the expense on your tax return?
There’s a good case to be made for the answer being “yes” if you plan, after receiving your new certification, to remain in business as a self-employed therapist. You’re not changing fields or starting a new business—merely expanding the scope of clients you see.
On the other hand, you could argue that marriage and family counseling is a different field under the umbrella of therapy as a whole, and the degree you’re pursuing is allowing you to meet the minimum requirements to practice in that field—meaning it doesn’t qualify for the deduction.
Unfortunately, this is another one of those dreaded gray areas when it comes to taxes. Different states have different requirements for therapists to practice, and your personal situation comes with its own variables—whether you plan to remain in business as you are or launch a new, expanded practice, for instance.
The answer here is, “Ask your accountant”—or, if you use Heard, use in-app messaging to contact your accounting and bookkeeping team.
Can therapists deduct the cost of clinical supervision?
If you need to pay for clinical supervision in the course of getting your post-secondary degree so you can be licensed as a therapist, the cost is not tax deductible.
It’s part of the cost of meeting minimum requirements to practice in your field.
If you have to pay for supervision for other continuing education—for instance, to qualify for additional licenses as a therapist, as in the example above—the cost of supervision is only deductible if all the other expenses you’re incurring are also deductible.
With that said, if you’re licensed and you seek professional consultation from another licensed therapist, that cost would be tax deductible.
Consult with an accountant if you’re unsure.
How to claim the education expense deduction
You claim the education expense deduction on your personal tax return. Which form you use varies depending on your business structure.
Even if you don’t qualify for the education expense deduction, there are plenty of other deductible expenses that help reduce your therapy practice’s tax burden. Check out our complete list of tax deductions for therapists.
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.
Bryce Warnes is a West Coast writer specializing in small business finances.