Tax Deductions for Therapists in California

Practice Expenses

California therapists (LCSW, MFT, psychologist, LPCC) running their own practice can deduct all ordinary and necessary business expenses. Office rent, utilities, and maintenance are deductible. Office furniture, decor, and supplies are deductible. Billing software (SimplePractice, TherapyNotes, TheraNest), EHR systems, and scheduling platforms are deductible. Professional books, journals, and assessment tools are deductible. Supervision fees paid to a licensed supervisor are deductible.

Licensing & Continuing Education

California BBS license fees, renewal fees, and continuing education required for license maintenance are fully deductible. California requires 36 hours of CE every two years for most mental health licenses. CE course fees, conference registration (CAMFT, NASW, APA), and travel to CE events are deductible. Professional association dues are deductible. Consultation fees paid to colleagues for case consultation are deductible.

Malpractice Insurance

Professional liability (malpractice) insurance is fully deductible. California therapists typically carry $1 million/$3 million coverage. CAMFT and NASW offer group malpractice insurance at reduced rates — premiums of $200–$800 per year are fully deductible. General liability insurance for your office space is also deductible.

Telehealth Technology

HIPAA-compliant telehealth platforms (Doxy.me, Zoom for Healthcare, SimplePractice telehealth), secure messaging platforms, and encrypted email services are deductible. A computer, webcam, microphone, and ring light used for telehealth sessions are deductible for the business-use percentage. Internet service used for telehealth is deductible for the business-use percentage.

California Therapist Tax Rules

California therapists who are self-employed (not employees of a group practice) are self-employed and can deduct all ordinary and necessary business expenses on Schedule C. Healthcare professionals are excluded from the QBI deduction at higher income levels federally, and California does not conform to the QBI deduction at all. The S corp election can save self-employment taxes for therapists with net profit over $60,000–$80,000. KDA helps therapists determine the optimal entity structure for their practice.