A real deduction saves 39 cents on the dollar. Four popular ones save nothing.

The one sentence that decides it

You are holding a receipt and deciding whether it counts. Nobody makes that decision from a list of thirty things, however many lists you read. It is made from one sentence of statute, and almost every argument you will have with yourself turns on a single word inside it.

Necessary is the easy half. The IRS defines it as an expense that is “helpful and appropriate for your trade or business” and adds that it “does not have to be indispensable to be considered necessary.”^[3] Almost anything you bought on purpose clears that bar.

Ordinary is the word doing the work. The same guidance defines it as an expense “that is common and accepted in your industry.”^[3] The Supreme Court has been at this since 1933 and was careful not to make it a checklist: what is ordinary “is none the less a variable affected by time and place and circumstance,” and “the standard set up by the statute is not a rule of law; it is rather a way of life.”^[2]

So the test is not did I spend this because of my practice. It is would a room full of other California therapists in solo private practice recognize this as a normal cost of doing this work. The trade is psychotherapy, not your particular way of practicing it. That framing settles most of what follows, in both directions.

One piece of housekeeping first, because it will save you reading bad advice. A great many articles on therapist deductions cite IRS Publication 535. Publication 535 has been discontinued — the final revision was for tax year 2022, and Publication 334 now says so in terms.^[4] If a page is citing 535 as current, it is quoting a document the IRS stopped updating four years ago. The business-expense material now lives in Publication 334, Publication 463 for travel, and Publication 587 for the home office.

What clearly qualifies, and the trap inside each one

Everything below is a genuine §162 expense for a therapy practice. Each one also has a way of going wrong, and the trap is usually more useful to know than the entry.

• License and renewal fees. Ordinary under §162.^[1] A California active biennial renewal is $100 from 1 July 2026 under the Board’s temporary reduced schedule, so about $50 a year.^[5] The trap: fees paid before you see your first client are not current expenses at all — they are start-up costs under §195, which is a different rule and a different form.
• Professional association dues. CAMFT, or the California Psychological Association if you are a psychologist. The trap: §162(e) disallows the portion of dues spent on lobbying and political activity.^[1] Associations that lobby are required to tell members what that percentage is. Ask for it and deduct the rest; almost nobody does. Neither CAMFT nor the main malpractice carriers publish their prices openly, so we have not put a figure on either here.
• Continuing education, including the travel to it. Treas. Reg. §1.162-5(a) allows education that maintains or improves skills required in your present work, or that is required by law to keep your license.^[7] The BBS requires 36 hours per two-year renewal period, of which 6 must be law and ethics.^[6] Travel to a conference is deductible under §162(a)(2) and Publication 463.^[8] The trap: if the trip is primarily personal, only the expenses directly connected to the business part are deductible — the airfare is not.^[8] And the meals on it are still capped at 50%.
• Clinical supervision and consultation. Post-license consultation, peer consultation groups, case consultation with a specialist — plainly ordinary for a licensed clinician. The trap: pre-license supervision bought in order to become licensed is a harder question, and it belongs with the education problem in the fourth section below.
• Malpractice and cyber liability insurance. Ordinary, and for most therapists effectively compulsory. The trap: only the business policy. Your own health insurance is a different deduction under §162(l), and unlike the items on this list it reduces income tax only — it does not reduce self-employment tax.^[1]
• Practice-management software. A SimplePractice Essential subscription is $79 a month at list price, $948 a year.^[11] We have a longer page on what SimplePractice actually costs a California solo practice, including the card-processing side. The trap: none worth naming. This is the cleanest line on your Schedule C.
• Office rent. §162(a)(3) names it explicitly — “rentals or other payments required to be made as a condition to the continued use or possession” of property you do not own.^[1] The trap: renting an office is what makes your drive to it a personal commute. See the fourth section.
• The home office, if you have no rented office. §280A(c)(1) allows the deduction for a part of the home “exclusively used on a regular basis…as the principal place of business,” and treats a space used for administration as principal if there is no other fixed location where you do substantial administrative work.^[9] The simplified method is $5 per square foot, capped at 300 square feet, so $1,500 at most.^[10] The trap: exclusively. A room you also watch television in fails, and Publication 587 says so directly.^[10]
• Telehealth costs. The video platform, the secure fax, the extra headset. The trap: your home internet and your phone are mixed-use. You are deducting a business percentage, and you should be able to say how you arrived at it.
• Legal and accounting fees. Ordinary. The trap: fees to form an entity are not. Incorporation costs are organizational or start-up expenditures, not current expenses — which is one of several reasons to read what a professional corporation actually costs before paying for one.
• Business bank charges and merchant fees. Card-processing percentages on client payments are pure §162. The trap: they are only visible if you have a separate business account, which is the single most useful thing on this page.
• Books, assessment materials and clinical supplies. Ordinary. The trap is Californian. Anything expensive enough to be capitalised can be expensed at once federally under §179 — the 2026 federal limit is $2,560,000, which no therapy practice will ever approach.^[24] California allows only $25,000, with the phase-out starting at $200,000, and does not conform to federal bonus depreciation at all.^[14] For a therapist this rarely bites, but it means your federal and California depreciation schedules are genuinely different documents.
• A directory listing. Psychology Today, a professional directory, your website hosting. Advertising is ordinary and necessary for a practice that needs referrals.

Two adjacent deductions are worth knowing about even though they are not business expenses. Start-up costs under §195: before your practice is open, you may deduct up to $5,000 in the year it begins, reduced dollar for dollar to the extent total start-up costs exceed $50,000, with the remainder amortised over 180 months.^[12] And an HSA under §223, if you hold a high-deductible plan: $4,400 for self-only coverage in 2026, $8,750 for family, deductible even if you do not itemize.^[13][15] Like the health-insurance deduction, an HSA contribution reduces income tax but not self-employment tax, so it is worth roughly two-thirds of what a practice expense is worth. That gap is the subject of the fifth section.

Your own therapy

This is the question every therapist asks and almost nobody answers straight. The honest answer has three parts and only the first one is comfortable.

The default position is that your own therapy is a medical expense, not a business expense. §213(d)(1)(A) defines medical care as amounts paid “for the diagnosis, cure, mitigation, treatment, or prevention of disease,” and Publication 502 confirms that you may include “amounts you pay for therapy received as medical treatment.”^[16][17] But §213(a) only allows medical expenses “to the extent that such expenses exceed 7.5 percent of adjusted gross income,” and only as an itemized deduction.^[16] For the therapist in the worked example below, adjusted gross income is $109,664, so the floor is $8,225 — every medical dollar below that produces nothing. And with a 2026 standard deduction of $16,100 for a single filer,^[24] most solo therapists do not itemize at all, which means the practical answer for most readers is zero.

The business argument exists, and it is narrower than people think. Where personal therapy is a documented requirement — of a training program you are enrolled in, or of a supervision or consultation contract you have signed — there is an argument under §162 by analogy to Treas. Reg. §1.162-5(a)(2), which allows education “required…to keep the taxpayer’s present position.”^[7] That is a real argument. It is not a settled one, and there is no clean authority holding that a licensed therapist may deduct ongoing personal therapy as a business expense.

And there is a line in Publication 502 that cuts both ways, which is the sharpest thing on this page. The IRS says: “You can include in medical expenses payments for psychoanalysis. However, you can’t include payments for psychoanalysis that is part of required training to be a psychoanalyst.”^[17] Read that carefully. The IRS’s own position is that therapy undergone as training is not medical care. That does not automatically make it a business expense — and if the training in question is the training that qualifies you for the license in the first place, Treas. Reg. §1.162-5(b)(2) and (b)(3) push it out of §162 as well.^[7] A pre-license trainee can end up holding an expense that is neither medical nor business. That is an uncomfortable result and it is the one the published guidance points at.

If you intend to take the business position anyway, these are the documents that would have to exist before the return is filed, not after a letter arrives:

• The written program requirement or the signed supervision or consultation contract, naming personal therapy as a condition of a position you already hold.
• Evidence that you already met the minimum qualifications for that position — the §1.162-5(b)(2) problem — so this is maintenance, not qualification.
• Dates, hours and invoices from the treating clinician, kept contemporaneously.
• A tax preparer who has seen the contract and is willing to sign the return. If nobody will, that is the answer.

Nothing here says the deduction is impossible. It says it is contested, that the default treatment is §213 with a 7.5% floor most people never clear, and that anyone telling you your own therapy is straightforwardly a write-off has not read Publication 502.

Four things that do not work

These four come up constantly, in the same words, in the same groups. Each one has a specific reason it fails and it is worth knowing the reason rather than the ruling, because the reason generalises.

1. The clothes you wear to the office. §262(a) is short: “Except as otherwise expressly provided in this chapter, no deduction shall be allowed for personal, living, or family expenses.”^[18] The controlling case is Pevsner, where a boutique manager was required by her employer to wear Yves St. Laurent clothing at work and never wore it elsewhere. The Fifth Circuit still denied the deduction. Clothing is deductible only if it is required as a condition of employment, not adaptable to general usage as ordinary clothing, and not in fact so worn — and the second element is judged objectively, not by whether you personally would ever wear it out.^[19] A surgeon’s scrubs pass. The blazer you keep for sessions does not, no matter how sincerely you never wear it anywhere else.

2. Driving from home to your rented office. Rev. Rul. 99-7 states the rule plainly: “In general, daily transportation expenses incurred in going between a taxpayer’s residence and a work location are nondeductible commuting expenses.”^[20] There is a real exception and it is worth understanding, because it is the one that applies to therapists. If your residence is your principal place of business within the meaning of §280A(c)(1)(A), you may deduct the trips between home and another work location in the same business “regardless of whether the other work location is regular or temporary and regardless of the distance.”^[20] So a therapist who does all scheduling, notes and billing at home and has no other fixed location for that work can deduct the drive to a rented session room. A therapist who does their admin at the office cannot deduct the drive to it. Same car, same road, different answer, and the difference is a §280A question rather than a mileage question.

3. The full cost of a meal with a colleague, called networking. §274(n)(1) caps food and beverage at 50%.^[22] The temporary 100% restaurant provision people still repeat applied only to expenses “paid or incurred before January 1, 2023” — it is written into the statute with that date and it has not been restored.^[22] For 2026 the answer is 50%. And the 50% is a ceiling, not a starting point: §274(k) allows nothing at all unless the meal is not lavish and you or an employee are present, and §274(d) requires you to have recorded the business purpose and the business relationship of the person you ate with.^[22] A coffee with a friend who is also a therapist, with no named business purpose written down at the time, is not a deduction at 50% or any other percentage.

4. Education that qualifies you for a new trade — which includes your own master’s degree. Treas. Reg. §1.162-5(b)(3) disallows education “which is part of a program of study being pursued by him which will lead to qualifying him in a new trade or business,” and (b)(2) separately disallows education undertaken to meet the minimum requirements for qualification in the first place.^[7] The regulation’s own example is a working engineer attending law school: not deductible, even though he intends to keep working as an engineer. Your MFT or MSW is the same shape. So is the coursework that leads to the license.

This is the one that hits associates hardest, and it deserves saying at full length. If you are an AMFT, ASW or APCC, the largest single expense of your professional life — the degree — is not a business deduction, and no amount of arguing that it was necessary changes that, because the objection is not necessity, it is that the education qualified you for a trade you were not yet in. The costs that are deductible once you are registered and earning are narrower and smaller: your BBS registration and annual renewal, professional liability insurance, association dues, the continuing education required to renew, and consultation you buy over and above what your employer provides. Supervision required to accumulate your 3,000 hours sits in the uncomfortable middle: it is a condition of a registration you already hold, which is the §1.162-5(a)(2) argument, but it also leads to a license you do not yet have, which is the (b)(3) objection. Take that one to a preparer with the specifics rather than to a group thread.

What a deduction is actually worth at $140,000

Here is the arithmetic nobody runs, and it is the reason the rest of this page matters. A business deduction on Schedule C is not worth your income tax bracket. It is worth your income tax bracket plus self-employment tax plus California, all at once, and the combined figure is considerably higher than most therapists assume.

The example: a single filer, sole proprietor, no employees, $140,000 of gross practice income and $22,000 of deductible expenses. She is a sole proprietor because a California therapist cannot form an LLC to provide licensed services — Cal. Corp. Code §17701.04(e) blocks it, and the real choice is sole proprietorship or a California professional corporation.^[25] Federal figures are the 2026 amounts from Rev. Proc. 2025-32.^[24] California figures use the 2025 schedule, because as of this article’s date the FTB has not published the inflation-adjusted 2026 brackets.^[21]

The expense list. Some of these are published prices; most are your own invoices, and we have marked which is which rather than inventing figures for things nobody publishes.

Note what is not on that list. She rents an office, so there is no home-office deduction and, under Rev. Rul. 99-7, no deductible mileage for the drive to work.^[20]

Now run the year twice — once with the deductions and once without — and the difference is what they are worth. Net earnings from self-employment are 92.35% of profit, because §1402(a)(12) subtracts 7.65% before the tax applies.^[23] Self-employment tax is 15.3%, and both figures here are under the 2026 Social Security wage base of $184,500, so the full rate applies to all of it.^[27][26]

The difference is $8,608 on $22,000 of expenses. Divide it out and every deductible dollar saved her 39.1 cents. Here is where those cents come from, which is more useful than the total, because this part scales to your own numbers.

Three details in that middle table are worth pausing on, because each one is a place people get it wrong.

• Self-employment tax is the biggest single layer, and it is the one people leave out. At 14.13 cents it beats the federal income tax effect for anyone in the 22% bracket. This is also why a §223 HSA contribution or a §162(l) health-insurance deduction is worth materially less than a practice expense of the same size — neither touches self-employment tax.
• The federal saving is 16.36 cents, not 22. The deduction cuts adjusted gross income by only 92.94 cents, because the deduction for half your self-employment tax shrinks at the same time. Then §199A takes back a fifth of what is left. A 22% bracket produces a 16.36% effective saving.
• California is 8.64 cents and does not give the 20% back, because there is no California version of §199A. Form 540 starts from federal adjusted gross income and the §199A deduction is taken after that point, so it never enters the California computation at all.^[28] Both scenarios sit inside California’s 9.3% band, which runs from $72,724 to $371,479 for a single filer on the 2025 schedule.^[21]

One caveat on the table so you can reproduce it: California exemption credits are subtracted after tax and are identical in both columns, so they cancel out of the difference and are omitted. The California standard deduction used is $5,706, the 2025 single amount.^[28] If your own bracket is 24% federally rather than 22%, the combined figure rises to roughly 41 cents; if you are in the 12% bracket, it falls to about 32.

The 20 per cent you cannot count on

The §199A qualified business income deduction is 20% of the profit of a pass-through business, taken after adjusted gross income.^[29] Two questions matter for a therapist, and only one of them gets asked.

Is it still in force for 2026? Yes. The sunset that would have ended it after 2025 was repealed in July 2025, and the section is now permanent. The same amendment added a floor: if you have at least $1,000 of qualified business income from businesses you are active in, the deduction is at least $400, indexed after 2026.^[29]

Is a therapy practice a specified service trade or business? Yes, and this is the part therapists are rarely told. Treas. Reg. §1.199A-5(b)(2)(ii) defines the field of health as the provision of medical services by individuals “such as physicians, pharmacists, nurses, dentists, veterinarians, physical therapists, psychologists, and other similar healthcare professionals” acting in that capacity.^[30] A licensed psychotherapist treating clients sits inside that description. Being an SSTB does not reduce your deduction directly — it removes it once your taxable income clears a threshold.

Those are the 2026 figures from Rev. Proc. 2025-32; the phase-in range was widened by the 2025 amendment to $75,000 for single filers and $150,000 for joint.^[24][29] The therapist in the worked example has taxable income of $93,564 before the deduction, far below the threshold, so her SSTB status costs her precisely nothing and the full 20% applies.

The therapists this reaches are not usually the high earners you would expect. The threshold is on household taxable income. A therapist with $90,000 of profit who is married to someone earning $340,000 is over $403,500 and losing the deduction on her practice income, while a single therapist with $200,000 of profit keeps all of it. That is worth knowing before you file jointly without running it both ways.

There is one more consequence hiding in the arithmetic above. While you are under the threshold, §199A quietly reduces the value of every business deduction you take, because a deduction lowers qualified business income too. That is not a reason to spend less. It is a reason to be unimpressed by anyone selling you a purchase as a tax saving.

Substantiation, and what to do on Monday

A deduction you cannot evidence is not a conservative deduction, it is an absent one. For travel, meals, gifts and listed property, §274(d) allows nothing “unless the taxpayer substantiates by adequate records or by sufficient evidence corroborating the taxpayer’s own statement” the amount, the time and place, the business purpose, and the business relationship of anyone involved.^[22]

The regulation says what adequate records means, and the key word is contemporaneous. You need “an account book, diary, log, statement of expense, trip sheet, or similar record” in which each element is “recorded at or near the time of the expenditure or use,” together with documentary evidence.^[23] Documentary evidence is required for any lodging, and for any other expenditure of $75 or more.^[23] Reconstructing a year in April is not what the rule asks for.

And the one-line rule worth remembering: the regulation says “a canceled check, together with a bill from the payee, ordinarily would establish the element of cost” — together. A bank statement is not a receipt. It proves money left. It does not prove what it bought or why.

Mileage, if you have any deductible mileage after the commuting rule: 2026 is a split year. The business standard rate is 72.5 cents a mile from 1 January to 30 June and 76 cents from 1 July to 31 December.^[31] Which means a 2026 log has to record dates, not just totals. If you did not keep a log, you do not have a mileage deduction; the log is the deduction.

What to do this week, in the order that pays:

• Open a separate business account and card if you have not. Everything else on this list is easier afterwards, and the merchant fees become visible and deductible instead of buried.
• Ask your association for the nondeductible lobbying percentage of your dues, and deduct the rest. It takes one email and it is a line nobody adjusts.
• Decide the office question once. Rented office, or home office with nothing else fixed — the answer determines whether your driving is deductible, and you cannot have it both ways.
• If you are deducting a home office, measure the room, photograph it, and confirm honestly that nothing personal happens in it. Exclusive means exclusive.
• If you are pre-opening, keep those receipts in a separate folder. They are §195 start-up costs, not current expenses, and mixing them is the most common first-year error.
• Put the receipt discipline where the purchase happens — photograph anything over $75 at the counter, and write the business purpose on the photo. That is what “contemporaneous” means in practice.
• Then make sure the saving reaches your bank account. A deduction only helps if your estimated payments reflect it — California asks for 70% of its year by 15 June, so overpaying early is a real cash-flow cost, not a rounding error.

Everything above is arithmetic and citation, which is the part that can be written down. What it cannot do is decide the contested cases — your own therapy, an associate’s supervision, the exact business share of a phone. Take those to a preparer with the documents in hand, and use the tax strategy page to see what the answer is actually worth before you spend an hour arguing about it.