Badass Therapists Building Practices That Thrive
Welcome to Badass Therapists Building Practices That Thrive, the ultimate resource for mental health professionals ready to step into their power, grow their practices, and create a career they love. I'm Dr. Kate Walker, a Texas LPC/LMFT Supervisor, author, and business strategist who's here to show you the path to success.
Formerly Texas Counselors Creating Badass Businesses, we’ve rebranded because, well, we’re way too big for Texas now! This community of badass therapists is growing nationwide, and we’re here to help you create a career and practice you love, no matter where you are.
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Badass Therapists Building Practices That Thrive
128 Write Offs for Small Business: Tax Deduction Insights for Therapists
Get your step by step guide to private practice. Because you are too important to lose to not knowing the rules, going broke, burning out, and giving up. #counselorsdontquit.
Thank you. Hey, I'm Dr Kate Walker. Welcome to your Tuesday coaching. I see we've got people in the waiting room, so let's let everybody in. All right, I think we've almost got everybody, and I will keep that open just so I can keep pulling people in. And I will keep that open just so I can keep pulling people in. And we've got meeting notes going on in the chat as well, which is super fun because it remembers what I say. So I love that. All right. So welcome to your Tuesday coaching. I'm so glad you're here and is it is the season, right, is the season to get our taxes going and in order, and so I mean I do this every year.
Speaker 1:In some years I hire an expert to come in and talk to us. So remember, as Step it Up members, you have access to a great training in there, and it's by Dr Olivia Waddell. In fact, she's done it for us two years in a row and those are recorded and if you watch those and take the quiz, you can actually get the ce for that. It's one of it's part of your unlimited ce. So obviously, do the most recent one. We keep the older courses in there, because that's how you keep your certificates, right? Not everybody remembers to download the certificate, so we always keep the older courses in there as well.
Speaker 1:But I wanted to do things a little bit differently, and this is a members only thing. I'm not even offering this to everybody out there in the world. I want you guys to have an opportunity to ask questions and remember, you don't have to ask questions about what I'm presenting. You can ask questions about anything. We're going to offer a bunch of stuff coming up here in 2025 for our Step it Up members, but I thought, well, you know what. We need to stick to the script today, because taxes are going to come up upon us before we know it. But you know I love AI and you know that I'm trying to get you guys to love AI. Not that I'm telling you how to feel, but AI is just so doggone handy and it's not like and I don't want to say it Siri right or Alexa right. When those things get triggered, you never know what response they're going to give.
Speaker 1:And with what I've done, at least in my research, there are different AI platforms to choose from. You don't have to do chat GPT that's the one I'm going to be using today and, of course, the disclaimer is please do not make AI, your accountant, double check all of this. I can spout rules, I can look things up, but you guys know that's that's what I'm here for the accountant's there to check your taxes, your attorney's there to make sure you don't get in trouble, all the things right. So I'm going to keep our waiting room open. I have our chat open and you guys know the deal If you unmute while I'm recording, you will be part of the recording. So if you want to wait to the end, totally okay, and I will keep an eye on the chat.
Speaker 1:So I wrote down some questions, some common questions that I get and that we see when we're stalking the social media threads, and I'll just read them off. I'll read all of them off to you and then I'm going to take them one by one and then if you guys want to add to that in the chat, great, we will tackle that as well. Great, we will tackle that as well. So obviously, the title of this is what's a write-off? So, yes, get asked that all the time what's a write-off? But I went ahead and kind of divided this into what is a counseling practice write-off and what is a new business write-off, like if you are starting your private practice this year and you're considered a new business, sometimes you get extra stuff as your write-off that you won't get later on. That is down the years.
Speaker 1:So I put two things here counseling write-off, new business write-off and then one thing a lot of folks don't realize sometimes the standard deduction is actually more advantageous to you than writing off expenses. I mean, if you were a freelance musician and everything you got was 1099s for the year, yes, absolutely you're going to want to write things off. But I know most of the folks in my audience you're not freelancing out there, right, you are running your business, you have other expenses, you have a household, some of you have partners that you're going to file taxes with. So I'm going to leave this question here, because sometimes we put in the headache for itemizing and at the end of the year our accountant says, well, just do the standard deduction. And you're like, oh, why did I do all the work? But that's a good thing. And then organizing, let's see. Oh, I know what I put here. Okay, yeah.
Speaker 1:So one of the things Dr Waddell talks a lot about when you go back, if you're going to do those trainings which, again, I highly recommend you do, the most recent one. She is a huge advocate of organizing I am as well, and she uses a lot of paper. I do not, and just so, recognize, if you don't have an organizational system and you are a receipt keeper, organizational system and you are a receipt keeper, okay, you need to have an organization, organizational system right. And some people, uh, they scan in receipts, they, they, you know, take pictures with their phone. Whatever system you have, you have to keep in mind what do I keep? What's important to keep for the seven years or I believe it's seven years what's important? What's not important? What can you throw away? And you can ask me, but don't do as I do, because I just I'm I Well, I'll talk about it when I get to it. All right.
Speaker 1:And then, of course, people always want to know the tax advantages of your organization. So, if you are a sole proprietor versus if you're an LLC versus if you're an S-corp, now, everybody like those questions. Anything you want to throw into the chat, we can. But that's what I'm going to start with. And I'm pointing over here because I am going to ask ChatGPT and so we are going to see what Chat has to say about these questions. So and so we are going to see what chat has to say about these questions. So let's see if chat understands what a counseling write-off is. And one of the things about chat that I'm learning is, if you ask it a couple of different ways, that's helpful, and you guys are going to get the screen share. But if you are listening to me on a replay, don't worry, because I always talk you through what I am sharing. So let me make sure. All right. So if you are on the coaching call, you now get to see my screen. So here I go.
Speaker 1:I'm going to ask chat for 2024. What are counseling write-offs? Give at least 10 examples or more samples or more. And this we kind of knew, right. And so not only is Chad giving us big categories, it's going to give us subcategories. So let me. So we've got office space and utilities, we've got professional liability insurance. So that's your HPSO, your CHP, whatever it is, that you're using Continuing education and licensure memberships, office supplies and equipment, if you're using scheduling software, if you buy notebooks and pens, your telehealth and practice management software, marketing and advertising, travel and transportation, supervision and consultation. Now I'm going to ask chat to dive in that a little bit deeper, because if you get your own personal therapy and it is related to your business, so I'm not going to give an answer. Yet we're going to ask chat in a second Employee and independent contractor costs. So if you're contracting out with someone, if you pay them as a 1099 to do things like organize your stuff, write your blogs, social media manager, retirement contributions and health insurance Okay, now, these are huge.
Speaker 1:And for example, with travel and transportation, just because it says it's a write-off doesn't mean you get to write all of it off, right? Every year they'll tell you and it changes. It depends on the economy. Some years it's like, yeah, write it all off, everybody, get out there and travel, let's stimulate the economy. And then sometimes it's like, whoa, you can only write off 10% of all of it, right? So as you are going through your expenses for the year, you're going to see that they're pretty much the same. They're either monthly expenses or annual expenses.
Speaker 1:So if you're listening to my voice and you're kind of freaking out like, oh my gosh, I've got to go back and figure out all these things, well, usually it's a monthly recurring thing, so it's not difficult to go back and remember if you're not doing this. This is one of those moments. I'm not going to go down the rabbit hole. But you should have a dedicated business banking account, right? So all you have to do is look at those statements and you know every single one of those is for your business. Or I have a dedicated business credit card that I pay off every month so I can get points and go fly around and do all the stuff.
Speaker 1:So let's dive into a little bit of the consultation, supervision and consultation. I'm going to highlight that copy and I'm going to ask chat, when you say that is a write-off, does that include personal therapy therapy, all right. So there we go. It is not a tax deductible business expense. But if you're listening to my voice and you're an LPC associate or LMFT associate and you pay for clinical supervision, that is a write-off. Business consultation, such as coaching on private practice growth, that is tax deductible. So personal therapy for your own well-being, even if it makes you a better therapist and couples or family therapy Now again, I would talk to your accountant about this, because I have seen that both ways.
Speaker 1:But I hope all of you listening to me and watching me now have a great list of things that you can at least go check and see that those are write-offs. And remember what the prompt was. I asked what are counseling write-offs? Okay, and Step it Up, members. You're going to get this as a replay so you'll be able to stop and go back. You don't have to take screenshots or anything like that. You'll be able to see this list. Now I'm going to go to my second question. Now I'm going to go to my second question.
Speaker 1:Compare counseling write-off with a new business write-off. My first year of business, owning a practice, what can I write off? And while it's churning that out, remember a write-off. And I always think of that Schitt's Creek episode where he's talking to his dad about all the things he's bought. He said it's a write-off, it's a write-off. And he's bought lamps, he's bought rugs, he's bought all of these things. And his dad's just laughing at him, going what do you think a write-off is?
Speaker 1:Remember, a write-off lowers your profit, right? So if your business makes a profit or if your household makes a certain amount, your write-off it's like a minus sign. You get to subtract that EHR, you get to subtract that consultation. So it's a math equation A write-off is a minus sign and it makes your income or your profit lower and that means hopefully you'll pay less taxes. All right, oh goodness, look, chatgpt made me a chart. Oh, that's cool.
Speaker 1:So if you're in your first year of business running a private practice, you get access to both standard counseling write-offs and additional new business startup deductions. All right, so you can see, comparing here, same things office and rent, office supplies, software and tech, professional liability insurance, ceus and license fees. And that can include your memberships to things like ACA, marketing and website costs, supervision and consultation. Now you'll see this is different. So legal and business formation fees that's not going to be an ongoing write-off. That's going to be a write-off your first year. And then pre-launch expenses up to $5,000. You're going to want to check that with your accountant, verify that up to $5,000. I mean, imagine're going to want to check that with your accountant, verify that up to $5,000. I mean, imagine that.
Speaker 1:I've always said starting a counseling practice is the cheapest thing on the planet. You either just need a webcam and a cell phone plan or an internet plan, or you need to rent one day in an office and get a used couch and you know some a computer right. So up to $5,000, that's huge. But you can only do that after up to your launch. Once you've launched, you can't. I'm gonna get a new couch and I'm gonna get a new computer right Again, the computer, maybe, the couch, probably not. First year business expenses up to over $5,000. So that can be deductible as a counseling. But amortized again, talk to your accountant that just means they take that expense and they chop it up into pieces. So it makes more sense. New equipment and business coaching or consulting. So it's important to understand.
Speaker 1:As a counselor, you get one set, right, you're a counseling practice owner and or maybe you're a counseling 1099, right, if you're an independent contractor, if you're an LPC associate listen into the sound of my voice an LMFT associate, and you are a 1099 contractor somewhere. Right, that's your business. That's basically you running your business. So talk to your accountant about these counseling write-offs and new business write-offs. I mean, who knows? Right, it's interesting to me because I always love following the 1099 versus W-2 argument. Right, so if you are classified a 1099 everywhere you go, you might be entitled to some more write-offs.
Speaker 1:All right, I'm going to now move. Oh well, chatgpt, look at how handy you are. You're going to actually tell me the key differences for first-year business owners and it goes through each one of those things on the chart. So, startup cost deductions, amortization of additional costs over 5,000, home office deductions and that's about if, for instance, for me, I have a home office, there is no bed in this office, it is truly an office, and so that's a write-off, that's a dedicated business expense. New equipment deductions that's if I need a new computer later on. And legal and professional fees. All right, I see a question in the chat.
Speaker 1:When you pay estimated quarterly taxes, is it acceptable practice to deduct your anticipated write-offs from your quarterly revenue before making your estimate, rather than paying X amount on the entire revenue? Pay on your net instead of your gross, yeah, and then when you pay estimated quarter lease, does the IRS send you a form at the end of the year stating how much you paid for reference? So the first one I mean definitely ask your accountant about that. I do not, because my accountant gives me a number and he says pay this amount and pay it on time, and that's because he knows my projected net for the year, for the following year. So I'm trusting him to give me that projected net based on what I'm making. So that's what my quarterlies are. They're already based on my net. They're not going to be based on my gross. They're already based with all the write-offs taken out, because it's something. Now, if you're a new business owner and you don't have that previous history, it's going to be a little bit of a crapshoot for you. But again, with you and your accountant working together, you'll project the net and that will be your quarterly taxes.
Speaker 1:Second question when you pay estimated quarterly taxes, does the IRS send you a form at the end of the year? Not in my experience. And you can access that information by going to the irsgov website. I do that, so you know it's. In fact my accountant has me log into the irsgov website. I guess you know he can take my word for it. Yes, I promise I made my quarterly taxes, unless you listen to the episode that I recorded I don't know about three months ago about money mistakes and I thought I had written a check for $14,000 to the government and I did not. Just, you know one of those things. I did it with my inside voice instead of with my check writing hand. So it's always good to go to that irsgov and it will show you the estimated payments that you have made and when you get to the end of the year you're basically your accountant is going to say did you make them and did you make them on time. So I hope that helps. Good, all right.
Speaker 1:And then the biggest takeaway ChatGPT says in your first year of business, you can write off startup expenses plus standard counseling deductions, maximizing your tax savings. Would I like help? It always asks at the end if I want help, probably, All right. I'm going to go ahead and go on to my next question, which is standard deductions versus itemizing, and I'm just going to make it super general what is better? It's hard to type and talk. I found, okay, what is better? Itemized deduct? Oh, my goodness, deduct T-I-O-N or standard, d-d-u-c-t-i-o-n or standard, okay. And for those of you listening to me, you're not sure what a standard deduction is, that's Google that Every year the government sets what a standard deduction is, which is just a blanket amount that a household can deduct because of certain things, whether it's the number of people in their house, the number of kids in the house or the number of just household expenses, child care expenses, etc.
Speaker 1:Etc. So let's see what ChatGPT says Standard deduction versus itemized deduction. Which is better? It depends on how much you can deduct based on your expenses. So, standard deduction this is a flat deduction amount set by the IRS and it gives us that. I'm assuming, since I asked initially, this is for 2024,.
Speaker 1:Single married filing separately $14,600. Married filing jointly $29,200. Head of household $21,900. So this is best for, according to chat, people who don't have enough deductions to exceed the standard amount. It's simpler no need to track receipts for deductions. So if you know right now your itemized list of all the things is less than, let's say, if you are married, filing jointly less than $29,200. You might have that itemized stuff just kind of there, but you won't actually use that. Your accountant may advise you. Hey, you really are better off if you take the standard deduction, right. You want to take the bigger amount right, because remember, it's a minus sign we're trying to subtract this amount from your total household income or your business income, so you pay less taxes. So, number two, itemized deductions Instead of taking the flat, you list out specific expenses.
Speaker 1:Itemized deductions instead of taking the flat, you list out specific expenses. And this is where it gets a little bit more into what you're allowed to take the max. And then it says this is best for people who have high deductible expenses. So you're spending a lot of money on your business, right? If you know you are spending a lot of money on your business, then it might be better to itemize everything. So what is better for you as a private practice owner? Take the standard deduction. If your total personal deductions don't exceed the IRS limit and most people fall into that category itemize. If you have big deductions, such as high medical expenses, large mortgage interest, significant state and local taxes, large charitable donations, business owner and self-employed, then it's going to get into how you file.
Speaker 1:Your business deductions are not itemized. They go on Schedule C and they're separate from personal deductions. I'll talk about that in a second. Most private practice owners take the standard deduction while still maximizing business write-offs on Schedule C. What is a Schedule C? When you itemize or when you submit your taxes, and those are additional write-offs you get as a business owner.
Speaker 1:And so when I'm going to go ahead and skip the question, what should I keep or toss, and let's go ahead and see exactly what are the tax advantages of being a sole proprietor I knew that was going to be wrong. I got to spell check that one. I told y'all there are like four words that I will never be able to spell and I think that's one of them Sole proprietor, llc. And I know in Texas you must be a PLLC if you hold a license. But just for the sake of chat, I'm just calling it an LLC for now. Or an S Corp, all right. And so when people ask in the social media world, should I be an LLC, should I be an S-corp? And that's why most of the time I respond it depends.
Speaker 1:Do you need the tax advantages afforded by this particular structure? Afforded by this particular structure? So tax advantages if you are of a sole proprietor, versus LLC, versus S Corp. So if you're a single owner business, it's easy, it's a. It just the money becomes part of your money. It's called a pass through. All business deductions apply through. All business deductions apply. Downside it says self-employment tax is owed on all profits.
Speaker 1:No liability protection, best for solo practice. So what does that mean there? No liability protection. Y'all have malpractice insurance. You are protected. To a point Also, if in most states listening to the sound of my voice your primary house, place of residence and certain assets are protected in case of a lawsuit, et cetera, et cetera.
Speaker 1:Llc is a way to protect your assets from your business and or protect other businesses you own from each other. So if you have several businesses and you set up several LLCs, the idea is it's like unruly kids you're just wanting to make sure if one gets in a fight it doesn't mess up the other one. Mess up the other one, right? So that's the liability piece. Now LLC, the limited liability company. Again. If you're a license holder, that's put a P in front of that Tax advantages.
Speaker 1:You have some limited liability protection, pass-through taxation, just like with our sole proprietor, right. Your business profits that is included in yours. You don't have to do a big, complicated tax return. Can choose to become an S-corp later, all business write-off supply Downside. You still pay the full self-employment tax and LLC fees vary state by state. That's annual reports, franchise taxes, et cetera. And Texas just changed their franchise taxing thing and it's weird. I just got a notification they wanted me to file my franchise, which is always zero for me. But anyway, if you live in Texas, go to the Comptroller account Comptroller website and see if you're curious about your franchise tax.
Speaker 1:Llc is best for private practice owners who want liability protection but don't yet need S-corp tax savings. So again, if you're out there and you're listening to me and you're just, oh, should I become an LLC? Should I become an LLC? Ask yourself what are the tax advantages and what am I trying to protect and why, all right. Last thing S-Corp. Now this has the biggest tax advantage, but it depends on how much profit or income you make. So pass-through taxation no corporate tax can reduce the self-employment tax by thousands. All business right off supply Downside. The IRS takes a look at you a little bit harder, more administrative work and there's payroll and accounting costs. So it's important if you decide to do an S-Corp, you have an accountant. But in my opinion, unless an accountant tells you to become an S-Corp, I wouldn't just out of the blue say I want to be an S-Corp today. Ask the question why? Because the LLC gives you that limited liability protection. See what the S-Corp will do for you. That's different. It's best for private practice owners making $75,000 plus in net profit that's not just take home, that's just not the cash running through your practice. That's after write-offs, that is profit and those wanting to reduce self-employment taxes. So which business structure is best If you're just starting out, sole proprietor or LLC, if you want or need the liability protection, want or need the liability protection LLC, if you make 75K more in profit S-Corp, and then it goes on to tell you how much you can save with the S-Corp, again only if you have a Buku profit, all right.
Speaker 1:Going back to the what should I keep or toss question, it's really it's up to you, right, and I want you and I'm up against time, so I wanna open it up to your questions. Talk to your accountant. I mean, I rely on electronic records and if anybody else is listening to this and they're like Kate, don't do that, you need to have paper. I totally respect that. Again, what I try to do is to use one bank, one credit card for all of those expenses. So you know that's. There is a paper trail if I hit print. Not everybody's comfortable with that. So, again, this was this presentation is all about getting you ready for taxes. I'm going to hit the record button, which means I'm going to turn it off and open it up for questions.
Speaker 1:All right, do y'all have any questions or do you have any comments? Do you have any advice? Anything that you're doing that we might benefit from doing that we might benefit from. Rosa says can I get more clarity? Pllc versus LLC, especially if we are providing therapy, consulting, presentation, workbooks can it all be under one umbrella or do I need to separate them? Great question, and I'm going to give you the rule and then I'm going to give you my opinion. So PLLC is a rule in Texas if you are offering services under your license and if you are also offering workbooks and things that are non-clinical, that's a question for your attorney. So for me, when I first opened my counseling practice, I also offered non-clinical services and so I did not organize as a P, but that was like 20 years ago. I really recommend talking to an attorney who understands okay, I'm offering these multiple things, which holds more weight, right, if I'm? It's like I've always wondered okay, so if you offer any like one single clinical service, does that mean okay, you got to do the P for everything, like it's got to be a P. Or if you offer non-clinical stuff, does that offset all the P? Or non-clinical stuff, does that offset all the P? So that's part of my answer, rosa.
Speaker 1:The second part is it depends on the impact these different businesses will have. I think somebody actually asked that this morning and I think it was in the Texas Supervisor Coalition. They were just starting their supervision practice and they said do I need an LLC? And I didn't type anything in the response. But I'll tell you my thoughts here. Remember what I said earlier about protecting a business from each other, two businesses from each other.
Speaker 1:You know, if you're concerned that your counseling practice could negatively impact your supervision practice or vice versa and I don't know what kind of clientele you do, I don't know what kind of supervising you do, what your specialties are that would be the reason for me that you would separate them. That's one. The second reason to separate them is for marketing clarity, branding clarity. You know we all think about Arm Hammer. You know baking soda, right? Well, if Arm Hammer started selling magazines and they were going to brand it as Arm Hammer magazines, right, it would be confusing, like it's okay, are you a magazine company or are you still selling baking soda? So that, for me, is one issue, and it's a pretty big one for SEO and making sure the right people are finding you and that Google is delivering you to the people who are searching for the right service. So those are three things to consider when you're thinking about doing a PLLC, llc or just dividing things all together. All right, kathy wants to know.
Speaker 1:I get stuck not knowing which category specific things go in and end up with everything in a miscellaneous category. I get that, but I think I will ask chat GPT Yay, I'm so glad. Yeah, when my my first accountant, he kind of warned me. He's like, if you ever come to me with miscellaneous expenses, I will send you home. And so I was like, oh, it scared me. So I use a lot of advertising and marketing category, I use a lot of software category. So those two those are huge ones for me.
Speaker 1:And when you think marketing, it's got to be reasonable, right. Like, if I take a trip to somewhere and I'm going to do an Instagram post or I'm going to do a presentation from there, right, I can't say like the whole trip was for that purpose, right? So that's part of the marketing thing. You want to make sure you've got a savvy accountant, somebody who's up to date with current marketing strategies, and not someone who's like, well, I don't like that internet thing and you know I don't do that social media, right, if you're using social media and technology for your marketing, get an accountant who understands that I can't emphasize that enough and ask AI Great questions.
Speaker 1:What else All right? Well, if you have any other comments or questions, y'all. And if you are on Facebook, don't forget to tag me. Tag me and ask me questions. I don't generally see it unless you tag me, because I'm looking at all kinds of things in Facebook. You know, stalking those threads. So please, please, tag me if you have questions about today. And thank you all for coming. I'm so glad you're here and I hope you got something out of it. I hope you have a wonderful day and I will see y'all soon. Bye.