One frequently asked question by those early in practice is “What expenses are deductible on my taxes?” In my book with Jeff Barnett, Financial Success in Mental Health Practice: Essential Tools and Strategies for Practitioners we present a list of
business expense categories that we had taken as deductions. These include:
• Office supplies – e.g., paper, pencils, pens, computer software, coffee, tea paper cups,etc.
• Telephone – e.g., telephone company charges, answering service, long distance calls related to the practice
• Legal and Professional Services – e.g., consultation with attorneys, accountant fees, payments for transcription services, payment for a Psychometrist to conduct psychological testing
• Office rent
• Automobile – e.g., parking for practice-related activities, mileage allowance for consultation or volunteer services
• Bank charges – to cover costs of business account
• Subscriptions to Professional Journals
• Psychological Tests
• Continuing Education (including costs of attending professional meetings including hotels and meals)
• Professional Dues
• Licensure Fees
• Marketing – e.g., development of promotional materials, taking to lunch potential referral sources.
• Malpractice Insurance
• Office Overhead Insurance
• Computer hardware
• Cell phone and pager.
• Staff salaries and benefits.
So now it’s coming to the end of the year and you want to reduce your tax liability. Review the above list and see what you could be spending your monies on now rather than next year. If you do then the deduction is on this year’s taxes. Perhaps you can buy 6 months worth of anticipated postage? For psychologists perhaps instead of purchasing one pack of Beck Depression Inventories that you purchase 4 instead. Is it time to buy a new lamp for your office? New waiting room furniture? Have a new book (or books) that you think you will need next year, or want to subscribe to a new journal? Purchase/subscribe before the end of the year and it is a deduction for this year.
Know what it deductible and take a look at your income for this year and anticipated income for next year. It may be advantageous to make purchases this year rather than next year. It may similarly be advantageous to delay income to next year. If that is the case wait until the end of the month to bill your insurance cases for all of December. The monies won’t come until January and be credited next year.
Close inspection of your income patterns and knowing what expenses are deductible can help you better manage your tax liability.