The Therapist's 1099 Tax Guide

Your 20% deduction disappears as your practice grows. No structure brings it back.

Health is on the excluded list, and therapy is health. Below $201,750 of taxable income you get the full 20% qualified business income deduction. Above $276,750 you get nothing - and unlike every other profession, W-2 wages, owned property and an S corporation are all powerless to save it. But one thing does work: a therapist at $258,000 of profit who contributes $25,256 to a retirement plan saves $10,920 in tax, 43% of the contribution against a 24% bracket.

What you'll learn

• The whole slope — where the deduction peaks, where it dies, and why a practice reaches the threshold at billings that would leave most businesses nowhere near it
• Retirement as the one lever that works — the tables showing 40% to 50% returns inside the phase-out, and why a Roth contribution cannot do it
• Why the S corporation is oversold to you — a pure payroll play that at a defensible solo salary loses money at most income levels
• Superbills leave no paper trail — private pay generates no 1099, and it is all income
• Why the panel's 1099 will never match your billing — allowed amounts, contractual adjustments, copays and recoupments
• What you cannot deduct — your degree, your own therapy, and the value of sliding-scale or pro bono work
• The home office and what it unlocks — including the exclusive-use rule that a guest bed defeats
• Teletherapy across state lines — licensure and tax are two different questions, and market-based sourcing can create an obligation in a state you have never entered

New for 2026

• QBI thresholds $201,750 single and $403,500 joint — phasing to zero at $276,750 and $553,500
• Solo 401(k) up to $72,000 — with a $24,500 deferral, and it must be open by 31 December
• Social Security wage base $184,500 — above it the S-corp saving is 2.9%, not 15.3%
• Two mileage rates — 72.5 cents through 30 June, 76 cents from 1 July
• 1099-NEC threshold now $2,000 — up from $600

Who this guide is for

• Counsellors, social workers, psychologists and marriage and family therapists in private practice
• Clinicians whose practice is growing into the phase-out range
• Anyone told an S corporation will save them thousands, who wants the numbers first
• Practices that are largely private pay and receive almost no 1099s

Who it is not for

It says nothing about clinical practice, ethics, confidentiality or record-keeping. Those belong to your board, not to a tax book.

Why this one is different

It shows a full year end to end - $147,000 of receipts, $26,320 of expenses, taxed on $120,680 - then puts it on Schedule C line by line. And it does not pretend the phase-out can be structured around. It shows exactly what it costs, and exactly what to do instead.

Use it as an educational companion throughout the year, then bring your organized records and specific questions to a qualified tax professional when your situation calls for personalized advice.

Read on this subject

Free articles on the questions this guide covers, each one checked against IRS sources.

• Your CEUs are deductible. The degree that licensed you never was. Two gates, and the second disqualifies whatever got you licensed.
• Health is a specified service business. Your 20% deduction has a ceiling. Health is a specified service trade or business. Above the threshold, the deduction phases out to nothing.