Name: Unlock Hidden Tax Savings: Top Tax Deductions for Private Practice
Uploaded: 2026-11-10T20:30:11.239Z
Duration: 1 h 3 min 24 s
Description: Unlock Hidden Tax Savings: Top Tax Deductions for Private Practice

Transcript for "Unlock Hidden Tax Savings: Top Tax Deductions for Private Practice": Isabel, I think we need the slides. Here we go. Alright. Andrew, kick it off. All right. Sweet. Top tax deductions for private practice owners. Welcome. Welcome. It looks like we have folks in the chat from... Oh, Joy Light from Seattle. Shout out. We're in a very dreary Seattle right now. But folks from all over the place, thank you for joining to nerd out with my, dear friend and colleague Forrest on all things tax deductions for your private practice. The fact that you're making time out of your day, whether it's 11AM, like, where we are, whatever time it might be for you to come and learn about, you know, how to support yourself not just as a clinician but as a business owner is reflective of the investments that you're making in yourself as an entrepreneur and Forrest and I think that's pretty freaking awesome and we are gonna do our best to make it as fun as possible for you and so we're very grateful we're here. Forrest, why don't we go ahead and jump to the next slide. Awesome. Just some housekeeping. So you are automatically muted. You're not on camera. Unlike myself who was in a garage because my wife is a clinical psychologist and has sessions from 10AM to 4PM, even if you are exiled to an obscure room of your house to take your calls, you don't need to show yourself visually on the call today. So, however you're showing up, is totally fine. This will be recorded, and we will email the recording to you and the slides to you. And so if you have a session at 11:30 or whatever time it is your time and you gotta jump, totally fine. We will get this over to you. Big request. Please use the q and a. You'll see it in that chat... Right next to that chat function to ask any questions. Janelle pinned something up top to help you understand how to do that as well. And so, we will save time both throughout and at the end to answer any questions that might be coming up for you. As Forrest and I always say, it makes it a heck of a lot more fun for us to be able to answer your questions throughout. And I guarantee you, if you have a question that is coming up, you are going to be helping one of your colleagues in this chat today. Forrest and I, one of the things that we're very good at is talking about these topics. But one of the things that we do when we talk about these topics is sometimes we use words that you've never heard. And so if you hear a word you haven't heard or a concept that you haven't heard about and you want us to go deeper, please do that. It makes this experience so much better for you and all the other folks on this call. Forrest, go ahead and jump to the next slide. Well, before I jump to the next slide, there is another important announcement that we have our AMA next Thursday. So we got a lot of content to get through, and so highly encourage folks to rec... Or register RSVP for that event even if you can't make the time so that you could watch the recording. And we have a lot of content where we try to answer questions today, but that next session, totally intended for ask me anything, right, which is many questions as we can answer. So... Alright, Andrew. Now I can go to the next slide. Yeah. If you haven't gotten enough of Forrest tonight, please join us next week to come talk about more, accounting topics. That will that will let us know that you are the ultimate nerds, and we will reward you with some, some fun topics next week. Just a little bit about myself. I'm one of the cofounders at HEARD. I have... I started my career in public accounting at PwC. Worked with a lot of small, to medium sized businesses, both on the financial and tax accounting side of things. I built a tax software startup. I've seen therapists since I was, you know, 12 years old and first started having panic attacks and ended up marrying a clinical psychologist who I met in high school. And by proxy of that, all of the, people in my life are, therapist adjacent. Very grateful for the work that you do and very grateful that the intersection of this weird, nerdy accounting thing that I do gets to intersect with something that I'm so deeply personal about... Deeply passionate about on the mental health side. And so really grateful for the work that you do. Forrest, quick intro. Yes. So, actually, I met Andrew back in college, and then we started at PwC together. He convinced me to join his little start up, Herd, five and a half years ago, and it's been an awesome ride here over the last five and a half years. So wore a lot of different hats, whether it's sales, partnerships, expansion, customer onboarding, etcetera, but really enjoy this most as it's it's so helpful and needed in a way of translating these difficult accounting and tax topics, ideally, into a way that providers can leverage and then hopefully figure out how to save some more money and and have more seamless tax season. But we're gonna keep it moving. I'm gonna take... Oh, oh, no. Andrew's got one more slide before I take over. You could take over if you want to. The only... So quick quick background on Heard. If you haven't heard about Heard, if you've come to one of our, no pun intended. If you've come to one of our previous presentations, welcome. Thank you for coming again. We love that you're here. If you're a Heard customer, thank you. Quick background on Herd. We provide the technology and the services to support you, in managing your financial back office. And so what that means is we provide year round tax support, so both quarterly and annual tax support. We provide payroll for folks that run group practices or our s corps, provide done for you bookkeeping, and we have an amazing team of accounting professionals in the background, like the folks behind the scenes here and Morgan and Robbie to help you succeed in your practice and be set up for success. And so, we do have a consult link here. You can... Forrest, I believe you're gonna share it or maybe Isabelle in the background. It's an opportunity to set up some time with our team of new business advisors. These are... This is our sales team, but one of the things that, we always do and we take great pride in is, we probably tell just as many folks that HEARD might not be the right fit for you and your practice based on where you're... You are in your private practice journey. And so it's an opportunity as we head into tax season and start to think about that, which is crazy, to get a sense of where you're at, what might be the best fit for your practice, get a better understanding of some of the best practices and how you can approach your work. And if HEART is a great fit, awesome an opportunity to to learn more and move forward but if not we will certainly direct you in the path that might be most beneficial for you and your practice based on where you're at. So let's dive in and get into some of the juicy tax content and have some fun. Forrest. Okay. So what are we chatting about today? One, defining what a tax deduction is as well as why it can be a little bit of a challenging definition. And so that's why today we're gonna go through a comprehensive list of what is most commonly deductible, what is often missed as deductions, and those that people think they can deduct but actually can't. We'll talk through what you need to keep when it comes to receipts and how to track those deductions throughout the year. We'll do a deep dive on some of these deductions such as as the home office, which is, you know, one of the most common ones nowadays with telehealth, And then the lovely missing icon on five of the moves to make before December 31, but that keeps it a little ominous to keep folks wondering about what that truly is is gonna mean. So a lot to cover, and so we're gonna jump right into it. Before that, though, we wanna get the folks engaged a little bit here today, and this will help Andrew and I figure out how to best tailor, the contents. There's a quick poll of which best describes your practice today. Awesome. Well, looks like we got most folks filled out, and the majority folks are full time private practice, which is fantastic to hear. And then everyone but those who are thinking about starting a practice, which makes sense. So the good news is is if you're in somewhat of private practice, whether it's ten ninety nine contract work full time, you can take advantage of these deductions, and so you are in the right place. So as I mentioned, we're gonna start with what is a tax deduction, and I think you're gonna be surprised with this definition. And I promise after this slide, we will explain more beyond what this definition means and how to leverage it within your day to day of running your practice. Right? So you might have heard words like write off or deduction. We think it's best to explain these as a business expense. Why? Because in the world of private practice, truly a tax deduction is is a business expense. And so today, again, we're gonna try to do our best to use that business expense framing so that helps ideally reinforce, right, what you can and can't deduct. Now how the IRS defines it is they say, what is ordinary and necessary to operate your practice? Depending on your state, the type of therapy you're providing or practicing, obviously, this can mean hundreds, if not thousands, of different things. It also puts a lot of onus on you, right, as the business owner. So one thing you'll hear constantly today is if you think something might be a tax deduction, but you're not a 100% certain, it's always best to log it and then note it down as unsure. Then when you get to the end of the year and you meet with your CPA or accountant or you have someone you're chatting with throughout the year as your accountant, that is the great time to say, hey. I bought x y z. I'm unsure if this qualifies, right, as an ordinary and necessary expense to operate my practice. Should I include this? Right? So you wanna be sure to track them just to make sure you're not missing out on any. But some tips on how to navigate and the why behind, right, the vagueness of this definition. One is the differentiation between a personal tax deduction and a business tax deduction. So there are hundreds and hundreds of personal tax deductions out there, like the child tax credits, student loan interest. You know, if you buy a new home, some states have certain tax credits you can get. Today's presentation is purely focused on the business side of things. That does not mean there are plenty of other personal tax deductions you can take. Right? We're gonna talk a little bit about how to think about how much a deduction truly saves you on taxes. So I have a little example coming up shortly, but we don't want you to, by any means, overspend, after hearing all the different deductions you can take today because it's not a one for one. Receipts. So, again, we'll talk a little bit more about tracking here in a second, but this often comes up right off the bat is, okay. Do I need to keep my receipts? And there's a lot of different answers online or that folks hear from their colleagues. From the IRS, their general recommendation is keeping receipts over $75. Right? In today's world, almost everything is electronic or online. So my personal opinion, I would not meticulously organize every receipt over $75. Then why that is is there's two circumstances when you would need these receipts. One is the unfortunate chance you get selected for an audit. Totally random, often out of your control, often assuming you're not pushing the limits with the IRS. And that's more of, hey. If it happens, I will then take the time to organize them. But the percentage of getting audit is extremely low. The other more common example, which is usually only would need one or two of those receipts during the year, is when your CPA or accountant is preparing your taxes. They might say, hey, Andrew. I saw that $2,000 United Airlines, purchase on your business card. I didn't know you were doing travel. I just wanna reassure that this was for business. Right? So that's more common, and it gives your CPA or accountant who's filing your taxes that confidence, right, that something truly was a business expense. Now at the end of the day, it is your practice, your bookkeeping records, your expenses, and your deductions, so it's ultimately up to you. But there is a chance that your CPA or accountant might say, you know, I'm not comfortable working with you because of you trying to go against that IRS guidance since they wouldn't wanna sign off. So, TLDR on receipts over 75. If it's a... Only a paper receipt, put it in a folder. But assuming you have electronic one, I really wouldn't worry about it. Now going in deeper on all the variation in this... That definition we saw earlier or the ambiguity to it. Right? So I mentioned, hey. It depends on the type of licensure or practice you have, group practice, solo practice. Are you working or operating in multiple states? Is your CPA or accountant have a high risk tolerance? Are you... Did you request to work with someone who's like, hey. I wanna push the needle and, you know, go against guidance, which is never recommended from a CPA side. But there is that interpretation of the tax law So every CPA could interpret it differently and make their own judgments, and those judgments are often tied to their stance where they are really conservative CPA or an aggressive CPA. So, again, it's not always a a black and white answer of can I deduct this? There's often what if, it depends. And then it also allows for the creativity, which, you know, sounds crazy, but that's what accountants kinda nerd out on is, oh, like, let's dissect this situation. I know so and so can't take it, but maybe there's an opportunity for you to do like this. I really wouldn't worry about going into the weeds here. I think the nice thing about being in private practice is you often have less of those ambiguous types of expenses. I'll let Andrew share his, corny little line about if you can sniff it, then something else, but I always forget what it is. So, woah. Okay. What is it if you could sniff it, you could smell? a business expense, if it smells like one, if it feels like one, it probably is. So track it and then again work with your account at the end of the year. Nobody's sniffing anything, Forrest. Just a reminder, Morgan and Robbie are behind the scenes, and they are itching to get their fingers to work and answer your questions. So please drop some questions into the q and a. And a question from me to get things warmed up is how are you tracking your income and expenses throughout the year? Are you using a bookkeeping software like QuickBooks or Wave? Are you using a spreadsheet? Are you using AI? How are you approaching this? And so drop drop some of those answers into the q and a because I don't wanna get in trouble with Janelle in the background for using the chat. And for us, we can keep going in the meantime. Great. Okay. So this ties back to that question we asked earlier in the poll, right, of where folks are at in private practice. The only example that we commonly run into or hear about where you would have no use of tax deductions is if you are solely a w two employee. Now if you're a combination of w two employee and then you work as a ten ninety nine contractor at your hospital and then run run a part time private practice on the weekends and evenings, Awesome. A lot of opportunities for deductions. Again, if you're solely a w two employee like myself at Hurd, I can't take back tax deductions because I'm not self employed. The other call here is, let's say, you do have dual roles. Like you work at as a w two and a ten ninety nine or you have various ten ninety nines. You cannot deduct something that your employer has paid for. So if you're contracting at a group practice and they give you a a $100 a month stipend for CEUs, you can't then also take that CEU deduction on your return. The uniqueness I find, in the world of private practice though is you're often doing the the same nature of work, right, in these various different businesses. So if I buy a book to learn more about the best practices for treating anxiety, sure, that might apply to both my w two and my private practice or ten ninety nine. So you're in kind of the fortunate position of where you can still deduct that. Now kind of the polar opposite example I like to use here is let's say, hey. On the side, I'm an Uber driver, and then during the day, I operate in private practice. Now in Uber, you are self employed or a contractor. Different nature, different line of business, and so something you're buying for that... Your Uber self employed business, you wouldn't be able to then deduct here. Another common question we get here is, well, what if I operate a coaching and a therapy practice, or what if I, sell courses online in addition to it? Right? Each state and some of the state licensure boards have different rulings about what can be combined under one business and what cannot. So check with the local licensure board or some colleagues, who might have experience in this. But, ultimately, the nature of your business, like, if it is to provide psychotherapy services and courses, like, if you have a broad statement, then you can really include a lot under one business. Now if one starts to get a lot bigger, it might make sense to separate them out just from a liability or financial side, but that's another topic for another day. Alright. So this was a follow-up into what I mentioned earlier, but how much are you truly saving when you purchase something? Right? So I go out and buy a new laptop. Hopefully, I'm using my business credit card or business checking account because it's gonna make it a lot easier for your bookkeeping. Now oftentimes, folks thinks, oh, that a thousand dollar laptop reduced my taxes by a thousand dollars. That is not the case. It's actually a small subset of that, which is gonna depend on your individual tax rate. So 20% is a common number. Sometimes if you're in a California or New York and in a higher tax bracket, it could be closer to 30%. But this is an easy back of the napkin math way to figure out, alright. If I buy this a thousand lap... Thousand dollar laptop, how much my saving on taxes, which should be, okay, take that effective tax rate of 20%, and that means I'm saving about $200 in taxes. I'm gonna explain shortly how these, business expenses or tax deductions flow into your personal tax return. But the big takeaway here, right, is you're... It's not a one for one on savings and use 20 to 30% as that estimate. Andrew, quick pulse check. Any questions come in or things you wanna add so far? Nothing to add here. Just a reminder to keep asking your questions. We love your questions. Okay. Great. So we're getting a little bit more about tracking. I know we talked about the receipts earlier, but, hopefully, that was good news as it's really shouldn't be a big effort to track all those receipts. But what's really important is tracking the date, description, and dollar amount of every business expense. And then from a bookkeeping side as well, you're gonna wanna collect or or, excuse me, document the incomes as well. And so you'll see on this screenshot on the right, this is actually from Heard Software because we do bookkeeping here at Heard. But if you use QuickBooks or a spreadsheet, it's the same core function. Right? Date, description, dollar amount, and then where the bookkeeping comes in is that category column, that third column. So is what you purchase, is it software? Is it office supplies? And then if it's income, is it group therapy income, individual therapy income? And this is really the crux of bookkeeping. A lot of folks think bookkeeping is really going into the weeds and accounting and taxes. It's purely categorizing the income and expenses for your practice. Right? Now we always recommend, like I said earlier, having that separate bank account for your practice or that business credit card because It's gonna be a lot easier when you're going through that categorization or bookie... Bookkeeping to just be looking at the business. Right? If we call in the accounting world commingling, like, I'm using one account for business and personal, Usually, the biggest fill in is something like Amazon or Venmo. It's... Was that related to business? Was it related to personal? So doing your best to separate those out is gonna make it a lot easier, to track your finances throughout the year, have accurate financial reports, pay your quarterly taxes, because you have that reassurance that this one account is used for the business side. Now if you are incorporated, an LLC, PLLC, or professional corporation in California, you are required to have a separate business bank account. If you don't have an EIN as a sole proprietor, which is very normal, so if I open my therapy practice tomorrow, I didn't apply for an EIN, which is totally fine, I would go into my local US bank who I do personal checking with and go to the banker and say, hey, mister banker. Can you please open me a new checking account? Then I would use that checking account even though it's personal and designate it towards my business. So adding a nickname or using those last four digits to determine it. Right? And so can that... Having that one use of bank account, using that in either a bookkeeping software, then categorizing it in a spreadsheet. We normally recommend doing this each month or each quarter. It's gonna set you up for success when you get to the end of the year because essentially it's delivering a platter to your CPA or accountant saying, here are all my tax deductions or business expenses for the year. And this is also right where you could flag those a few different ones where you're unsure. Track it and then follow-up either when you meet with your CPA or account next or at the end of the year. And so how does that bookkeeping translate to annual taxes? Right? And this also ties back into that 20 to 30% savings when you purchase something. So assuming you're not an s corporation, you'll most likely fill out what's called a schedule c tax form. I shouldn't say you'll likely fill it out. This will be your CPA or if you're using TurboTax, this is what... How TurboTax translates the information from your questionnaire into this tax form. I know it's pretty fine print, but on the left in that highlighted portion, you'll see different categories. Right? Because that's why folks ask, well, can't I just give my bank statement for bookkeeping? So, well, then how are you gonna figure out what to put on your schedule c? On your schedule c, you need to know the exact amount to the penny for what you spend on advertising last year, what you spent on office expenses for the year. So it's about 15 or 20 different categories here that the IRS has on this tax form. So, again, think about expediting and making that seamless annual tax process. If I've done my bookkeeping throughout the year, I already have all these full categories. But if I'm Andrew, CPA, and we're sitting down to meet in March ahead of the April 15 tax deadline next year, and I say, hey, Andrew. How much did you spend on marketing last year? Or, hey. How much did you spend on office supplies? Would almost be impossible to try to figure out right in my head exactly what I paid. And so that is why bookkeeping is important, and keeping track of those deductions are important throughout the year. This is gonna be needed for taxes. And then if you are categorizing or keeping up with it at least on a monthly basis, it's gonna avoid missing out on tax deductions. Later on, we're gonna go through a huge list, and hopefully, there'll be some light bulb moments of, oh, I didn't know I can deduct that, and then go back and add it into your bookkeeping records. Alright? You can always add things back before your taxes are filed, but after your taxes are filed, it's a lot more difficult to add those expenses back. And, Angel, I'll pause here. I know we're... We have a lot of content, so trying to get through as quick as we can. But anything else critical to mention or any, confusion coming up in the q and a here? Kathleen had a great question. You were talking about California and briefly kind of breezing over the business entity structure in California and the type of entity that you can be. Maybe you can just revisit that real quickly. Yes. So California is the only state in The US where you do not have the option to be an LLC or PLLC as a licensed provider. So if I was a CPA in California, I also couldn't be an LLC or PLLC except the licensed. And so if you are going to incorporate, your only option is a professional corporation. Really, really important though, it usually only makes sense to form or incorporate that professional corporation when your practice is ready to be taxed as an s corporation. I know this is a lot. S corp usually makes sense at about a $100,000 in profit. Why I say all this is if I just form my professional corporation tomorrow, I'm taxed as a corporation, which means double taxation. And so highly recommend before forming that professional corporation, ensuring you're gonna save enough to be an s corp. We did a full session on s corporations and entities this summer. And so maybe as a volunteer now, if it's easy to find, we could resurface that recording because it's really a whole another topic on its own, but really important because we know there's so many providers in California, and they're often unaware of that requirement of your only option really to incorporate is being a professional corporation. Great question too. Thank you. Okay. This is a real quick slide. We do a trend report every year where we survey both herd members and non herd members to understand the financial state of private practice. I'm sure this is of no surprise, but if you are renting an external office space or a physical office, that was your GED number or that... Not usually. That was the highest expense for providers. Right? After that, software and technology, office expenses, and advertising and marketing. So if you wanna gut check yourself and how your practice was performing against other providers, whether it was insurance reimbursements or different expense rates, check out that trend report. But I think the nice thing about private practice is you often have a really high margin business. What does margin mean? It is your profit, which is your income minus expenses divided by your revenue. And so often, we'll see private practices have that profit margin of, you know, I would say upwards of 70%, sometimes even closer to 90%. So for every dollar they earn, they're keeping 90¢. To give you an industry comparison, a restaurant has usually about a 30% profit margin. So for every dollar they earn, they're only keeping 30¢ in their back pocket. Why I say this is in private practice, you have the opportunity to run a really lean and efficient business. And so the more you can cut expenses is great, but it's also just as important to document all those expenses so you get the tax deductions and, ideally, pay less taxes. Forrest, real quick. Chat's heating up right now. I love it. Keep bringing the questions over. Here we go. Farrah asked a question, are all private practices... You were talking briefly about quarterly taxes. Are all private practices required to pay quarterly taxes, or are there any exceptions here? So there's always gonna be, like... Or usually always some sort of exception. But the best way to think about quarterly tax estimates is using the IRS guidance, and they even use the word general because it's usually not a one size fits all. But, generally, if you expect to owe more than $1,000 in taxes during the year, you are required to pay quarterly tax estimates. So I would say almost every herd member that we work with gets a tax estimate. It's. the amount that differs greatly. The big thing to know is there's both state and federal tax estimates. The trigger or threshold to heat hit each of those might vary. And I always recommend if you don't think... Or if you think you might owe something but are unsure, paying some amount rather than no amount. But quarterly tax are a little bit tricky and always recommend chatting with the CPA or accountant on trying to get that... What your calculation is. But if you've heard people say, oh, wait until the end of the year, you don't have to pay them, or wait until you file your taxes, you won't have to pay them. I would highly recommend against that because time and time again, the IRS will find and penalize you. It is in their code that that is not allowed and there are fines and penalties. But just like any... Anything else, there are people who just get away with it because the IRS didn't catch them. But don't try to repeat that with the goal of not getting fined or penalized because you don't know if it's gonna gonna happen. And the next deadline, January 15, which is, for your q four and final estimate of the year. And then, Shauna, great question. I will be talking about that in a couple of slides here. So we'll come back to the home office deduction. That's an awesome one as Forrest had mentioned. Alright. And before I hand over to Andrew officially to go through the lovely laundry list of tax deductions, is a fun one. Quick... Another quick poll. Can you write off unpaid sessions? Alright. We have about 20% yes, 60% no, and 20% unsure. So, unfortunately, you cannot write off unpaid sessions with an asterisk next to it. Why this is is because there was no income received, And so, theoretically, there is nothing to write off. Why I say with that asterisk next to it is, as it assumes you're on the cash basis of accounting. 98% of the providers I've talked with over the last five years use the cash basis of accounting. I won't bore you with the difference of that versus accrual accounting. But the crux of cash basis accounting, money comes into my account, I recognize it as income. Money leaves my account, I recognize it as an expense. So for an unpaid session, no money entered my account, so there's nothing to write off. Similar if you have... Charge a cancellation fee. Right? Money is coming in from that cancellation fee. So that would actually be income. What about if a client or patient no shows? Can I write that off? No. Because money never came into the account. So my opinion, if I was the IRS, I would say yes because I was wasted time as a business owner and could have seen another client or patient. But, unfortunately, I don't leave the IRS. Maybe yet. Maybe one day. We'll see. Alright, Andrew. I'll hand it over to you to walk through all the deductions. Awesome. And then, Janelle, quick, question from Amanda. You probably saw it from Amanda in the chat on how do I collapse the chat to get back to the video on my phone. Sweet. Amazing. Okay. What are the most common tax deductions? Like Forrest said, there's a... Speaking of that, Amanda, I'm trying to figure out how to collapse this and open it up so I can see them. Getting old. Dang. Okay. Speaking of common expense examples here, think about all of the things that you pay for in your practice. And so, again, it's stupid. We're not sniffing anything, but if it looks like a business expense, if it smells like one and feels like one and is in the ordinary course and necessary course of your business, it's probably a business deduction for your practice. And so think about it. License renewals, they happen on a very regular basis. You have fees that you're paying to the board. You have malpractice and liability insurance. Sometimes you have professional insurance. There's mileage between your offices and your client sites. And so we can go deeper here if people have questions on business mileage and how to write that off. I don't think we do a cut out there for us. Correct me if I'm wrong, though. But you pay for professional association dues. You pay for professional books and clinical aids. I think Natasha has a book showing up to our house every day for a different type of treatment modality. Shout out to Amazon. A lot of folks and I saw... Gosh, who was it earlier in the chat is in a supervision? Kathleen, I believe, maybe, is in a supervision situation. So she's probably paying someone for support as she starts to scale up her practice, and maybe she's doing it on her own as well, building a caseload. And so that supervision... Yes. Stephanie, thank you. Awesome. Congratulations. That supervision that you're paying for in consultation, that you're paying for even after you get licensure, those are great things to write off as it can be really, really expensive. And, of course, one of the most, commonly tax deductible items is simple practice. You pay for an EHR practice management system that provides you telehealth and documentation. So if you're paying for, simple practice, you're actually saving money on your taxes. And the same goes for HEARD and accounting fees and, legal fees and all of that good stuff. Some other things to think about, advertising and marketing fees. And so our friend Stephanie, I'm gonna pick on her in the chat, is moving into our practice. Let's imagine she wants to get headshots and wants to redo her website and wants to pay somebody to help her with SEO or, you know, now AEO because we have AI and that's what people call it. All of these advertising and marketing services, those are great examples of things that Stephanie can be deducting as she's moving into her practice. Business meals. So in the pandemic, business meals were a 100% off because they were supporting, the local businesses. But as we've moved back into, I think it was 2024, 2025, it's only 50% deductible. But I know, for example, my partner went out last week and had a dinner with one of her colleagues, And, it was really focused on some, like, decisions that she's making in her practice, and that's gonna be a write off when tax time comes around. So lots of, different examples of things that we can be writing off, deducting. I know it's a mouthful. Please drop all of your questions into the chat, and I promise Forrest and I will dive deep here because we know it gets really fun. Yeah. Forrest, welcome back. He accidentally clicked excellent tab. Technology. We can do this. It's only Tuesday, so we can't judge ourselves too hard. Generally non deductible. So things like clothes, Forrest always likes to reference uniform. So, like, a police officer or a fire person, they need a uniform, and that's something that they're gonna pay for, or maybe they'll be given it. But let's imagine that they're paying for that. If they were running their own police service, this was a terrible example now that we're going down that, down that pathway as a public... me pause you. Yeah. I can give you a really easy one. Yeah. You're a the easy one. worker me the easy one. a construction hat. Yes. Right? You're not gonna wear your construction hard hat out on a date or in public, right, unless you're working. So it would be strictly using for uniform. Janelle, maybe I see her looking. Maybe she are... likes. to work you stretch. to pass judgment for us? People might be wearing their construction hats out. But, yeah, close. Use your best judgment on this one. Like, if you go to, you know, J. Crew and buy a bunch of outfits that you're gonna wear in the ordinary course of your life, but also do clinical work in, like, probably not tax deductible. If you are telehealth and work from home, no Instacarting groceries is not tax deductible. Please don't do that. But if you run a group practice or you operate in a physical setting and you're buying groceries that are being shared in that physical setting, that's something that you could probably consider writing off. A gym membership, there's, like, nuance here based on the type of care and work that you deliver and how integrated into your work it is where you might be able to justify it, but probably not. Education before your license, that's a no no. Commuting from your house to your office, that's a no no. Quarterly personal income tax estimates, these are not things that you can write off. And then self care, we'd love if self care was tax deductible. I'd be out there getting massages every week. I love getting a massage, but it is not tax deductible for your practice. One of the things that always comes up for us is is my personal therapy deductible in my practice? It depends, which is the answer that Forrest and I love to give. If it is ordinary and necessary in the course of your practice, that's something that you might consider. If it's medically oriented, there's a separate deduction that you count for in the context of personal deductions separate from your business tax return. If you are writing off, all of your medical expenses, which is only relevant to some people who have a large amount of medical expenses. But if it is, supervision or related to your development as a clinician, certainly something to consider. But, one thing to keep in mind, if you do take a more aggressive stance on personal therapy, God forbid, something were to ever happen and there were to ever be some sort of, like, litigation or court situation that comes up, they can subpoena your health records and, bring those into court. And so take that in consideration as you start to think about something that's a little bit more aggressive like that. Forrest, any q and a or questions that are coming up here that we wanna dive into? Yes. This slide for sure gets the most questions. So lastly, I wanna give Morgan and Robbie just some patience as they work through all of these different use cases. I think if you call outs business travel and vehicle use came up a lot, great news is those are the next two slides. We're gonna do deep dives into vehicle use as well as personal travel. Rosabella also asked about health insurance. We're gonna talk about health insurance as well later. Kathleen asked, Andrew, though... I can't remember when you mentioned this, but I hope it comes back to you. Can you define medical concerns? Oh, Do. you remember? Yeah. If it if it... As it relates to personal psychotherapy or personal therapy that you might be paying for, let's say that... Okay. For example, like, I deal with panic disorder, and I've seen a clinician, you know, intermittently since I was 15. Right? I would not pay for that if I was a clinician because it's not through my business because it's not in service of my personal development. Right? It is, you know, technically a medical condition having gat or panic disorder. And so there's an argument that I could make that if I were writing off medical expenses and itemizing my tax deductions versus taking the standard deduction, that I might be able to write it off there. But for that, I'm not gonna write it off in the business. But let's imagine, in Stephanie's case, she's paying for supervision work. It's developing her as a clinician. That's something that she's gonna write off through her business. And so in the context of personal therapy, some people like to take the stance that it's for their personal development and in order to be able to deliver the care and the work that they do that they're going to write that off. It's been justified on both sides from a deduction standpoint though. Helpful, Alright, Andrew. I'm gonna force us to move along here just in the effort of content. I know. There's, so much, fun have that. AMA next Thursday, and this is what Andrew and I love to answer. And we know a lot of times. Right? It's like, hey. We just gave the generalized bullet or deduction, but at the same time, like, what about in my own situation? So vehicle use for business. What's most important is that bottom part. What counts and what does not count? The most commonly confused piece here is, oh, I'm driving to my office. That's business mileage. To and from your normal office or place of work is not considered vehicle use for business. What a lot of the, herd members we have when it comes to vehicle use, there really isn't usually a lot of mileage or driving they're doing. Now I know some social workers we work with are doing constant, in home visits or some folks are truly always on the road because of their clientele or going to a lot of conferences and learning events. Normally, what I recommend when it comes to this is using the simplified method, which says, how many miles did I drive this year for business? Again, meeting IRS's definition and criteria of that. And then multiplying it by the set rate from the IRS. Why on earth they have two rates this year? I don't know. I've never seen that before. But that shows the importance of logging those trips Just like we're talking about receipts, if the IRS audits Andrew and says, hey, Andrew. You said you drove 4,000 miles last year for your business. I need to know the destination you went to and from, the purpose of that trip, and date. That's why you see in the top right our recommendation to do... Download a mileage app. I know Mileage IQ or Mile IQ, is a phone app that works like Google Maps. You start it when you're going on a business trip using your vehicle and then end it at the destination. At the end of the year, it gives you that total miles as well as that audit log and the events needed. Nothing to track in your bookkeeping here because this would be something your CPA adjusts for at the end of the year. There's a box, on your tax form that says how many miles did you drive for business, and then they would input that in. Now if you are someone who is driving thousands and thousands and thousands of miles, there is another method. It does require more tracking, though. Percent of actual use. What does this mean? It says, okay. I drove my vehicle for business 50% of the time. Right? And so 50% of my car expenses, I could technically deduct, whether that be, gas, tolls, car wash, maintenance. Right? The big thing is you'd have to track all of those expenses. You don't wanna keep them in your bookkeeping records because you're only getting a portion of them. And, again, it's only for the percent you use that vehicle for business. So unless you're driving thousands and thousands of miles and have a vehicle that you're using primarily for a business, probably not going to be worth it. But there are those subset of folks who do, and keep in mind because we know operating a car and driving especially now isn't really expensive, and so it can be a great deduction at the end of the year. Third use case, which you don't see on the slide but often comes up is I wanna buy a car through my practice. I've seen maybe three people in my five and a half years be able to meet the IRS's very detailed test. Why that is is anything that's expensive, the IRS puts a big test together so that they're not missing out on their money, right, or folks aren't taking advantage of them. Think about a new car, 50,000, that'd be a huge deduction. And so there's some very fine rules about, when and how you can buy a vehicle through your business. So, again, if you're... I think it's, like, 90% is the threshold of that vehicle needs to be used, something pretty high. And so if you are someone who is driving, you know, hundreds of miles every single week for your practice, that'd be something to look into. But, again, super rare that I've seen, private practice owner be able to buy a car through their practice. Business travel. So one thing to know about here, it is a a higher area of audit from the IRS. Just like I was saying earlier, things that are expensive, business travel is expensive. And you have people who try to say, oh, I'm going to Hawaii for ten days to chat with another therapist and then charge their hotels and and food and yada yada yada. This could be any industry, by the way. I'm not just saying that a therapist would try to take advantage of business travel, but it's a reality. Right? And so when it comes to business travel, make sure it qualifies as a business trip. This is usually fairly straightforward. But the big thing is, like, that purpose and reason you're going. I'm gonna slim down my normal example of, like, when you combine a business and personal trip. And so if I'm going to Arizona for the comp... A conference for the week, and then that weekend I decide to go to the Grand Canyon, the majority of my time, the purpose of that trip was for that business conference. And so no am I gonna deduct my hotel and rental car on the weekend back towards my practice, but I can still deduct my flight. I can still deduct my Uber to the airport and deduct all of the hotel and food and fees that incur while I'm at the conference. Other important call out here, Business meals during travel are still 50% deductible. So even if you're eating out while traveling, it's still only 50%. I'm gonna skip this poll because I think Andrea kind of already alluded to self care. Right? Unfortunately, you can't deduct. 24. So I was gonna say, deduction. I think, is this me or is this you? This is you, but if you want, I can I can do a quick, keep it rocking. of it? You're in a you're in a rhythm, man. You're. a spiritual. leader here. Home office deduction, think very similar to what we talked about for vehicle use. Two different ways to calculate, simplified, which is $5 a square foot times the total square footage of your office. Most folks don't meet that maximum over 300 square feet. Or the standard, which is the percent of use. Now different than vehicle use, most people use this standard method, which I'll talk about in a second. But a lot of folks don't know you actually have to qualify for the home office deduction in the first place. The one that really trips folks up is the exclusive use. It's actually an IRS standards. If I have a guest room and frequently have guests visiting my house, that's also my office. That wouldn't be exclusive use. That might be an area, though, where that creativity or thought around... We're talking about earlier, the judgment or, risk tolerance of CPAs. So if you're unsure if you're meeting the test, definitely chat with your CPA or accountant. In terms of the principal place of business, if you are someone who's works a hybrid schedule, so you work in an office as well as in a home office, I would say if on an average week, where are you spending the majority of your hours working? Not just seeing patients and clients, but working. So maybe late in the night doing some bookkeeping or, working on admin or billing. So all in for the week is majority of the time spent at your home office or an external office. Right? Explaining how that standard method works is very simple in terms of the calculation. It's what is the square footage of your office divided by the square footage of your home or apartment. You don't need to own your home to take the, home office deduction. Right? So that's your percentage. Makes sense. Right? It's like how much... What percent of my home is related to my office? Let's say it's 10%, 100 square foot office in my thousand square foot apartment. I could then take 10% of all of my different home office expenses and then use that for the home office deduction. Really, really important here. You do not wanna keep these home office deduction or home office related expenses in your bookkeeping records. Why? If I'm charging my, $2,000 rent every month to my bookkeeping, I actually only get to deduct 200 of that 10%. So I would be overstating my expenses every month in my financial records by $1,800. We have a great resource online that actually helped figure out and determine roughly what this home office deduction would be as well as details around each one of the categories. Just like bookkeeping, keep track of this throughout the year. Don't keep it in your bookkeeping records, but keep track of it. Last thing you wanna do this March is call Comcast, wait on a hold for an hour, and ask, alright. How much should I pay for my Internet? How much should I pay for my business phone line for the last twelve months? Right? So keeping track of it is great. And then your CPA or accountant will file the home office deduction worksheet, which will be included in your presentation. Alright, Andrew. I need a breather. So if you wanna do these last two slides in two minutes, and then we can move on to the last section. Yes. I'm happy to jump in here as well. Okay. Cool. Yeah. So lots of deductions that, could live outside of the schedule c as well. And so just a reminder, a schedule c is your business profit and loss. And so if you remember that mouthful slide where I shared all of the potential deductions that might be related to your practice, that's where you combined all of those plus the income from your practice, probably the income that shows up in simple practice for you. But there are additional deductions outside of your schedule c as it relates to your personal tax situation and, your business taxes as well. And so as a sole proprietor, you're responsible for paying, or disregarded entity. You could be an LLC or a PLLC. You're responsible for paying self employment tax, and so self employment tax is 15.3% of the net profit and half will be deducted automatically on your tax return as well. Premiums for your family, including marketplace plans, if neither you nor your spouse can get a subsidized employer plan. There's also potential deductions for you and your health insurance and the premiums that you pay and cover. Retirement savings, and this could be an entire presentation on retirement strategies, how to set up your plans, how to set yourself up for success and saving, what type of plans, all of that good stuff. Whether you have a SEP IRA, or set up some sort of solo four zero one k, there's lots of different approaches that you can take to reduce your overall tax liability by investing in your financial future. The QBI deduction... And, again, for all of these ones, these are great areas to put a pin in it and do a little bit of research on yourself, whether it's through, you know, Claude or Google or whatever you might use to do research. These are great areas to dig in. The QBI deduction is just an opportunity for, practice owners to deduct up to 20% of qualified business income. And so, this is an opportunity for you to obviously reduce your tax liability even further. And so these are three examples here that we're just briefly covering, but could do a full presentation on in and of themselves. Okay. Cool. Oh, go ahead, Forrest. No. I was just... I think we've honestly talked through a lot of this, which is, like, if you haven't been tracking expenses or bookkeeping over the next forty five days, put together a plan of how you're gonna clean yourself bookkeeping records up by the end of the year or go work with an accountant or bookkeeper. There's some fine tune rules around, like, limits and maximums when it comes to what you can pay. But I think this is an easy slide for a takeaway in terms of not really needed to go into the the weeds here unless there's anything you wanna specifically call out. No. I think? you're good. Okay. Cool. And just as a reminder, I know we're wrapping up technically here in four minutes. Andrew and I are gonna stick around, though, for another five to ten minutes to answer questions. And then one last plug, we do have that AMA next Thursday. We're gonna take all the questions asked here and design a few short slides to summarize the most popular questions, but really spend the majority of time answering live questions. So few little updates from Herds end here. I know Andrew gave a quick overview of... Earlier about the services HERD provides. But just last week, we launched our tax packages like we do every year. We really try to incentivize folks to figure out their taxes now opposed to next year. So if you're someone who's evaluating CPAs or accountants for next year, highly recommend trying to have someone locked in before the December holiday season. Why? January becomes busy season for CPAs and accountants. So the ones that are left, maybe not the best, and also just harder to get in touch with them and do a proper evaluation to make sure you find someone who fits good in your practice. So if you sign up for an annual plan with HEARD by the end of the year, you'll see up to 33... Almost $3,300 in savings. So free catch up bookkeeping, twelve months free of herd payroll. So you can actually run payroll within herd itself. You get your thirty minute annual tax consultation, and then just in all of our our our essentials and premium plans, your 2026 return, personal and business bookkeeping records, quarterly taxes, and then those unlimited state income tax filings. Something I'm really excited to announce because we've been hard at work at this over the last few months, This is our brand new premium plan. So our past webinars, we haven't had this. We actually just went out, in our newsletter today, brand brand new. And what we're most excited about is we listened to our members' feedback and built this because folks were looking for an elevated way to get one on one time with a... What we're calling a dedicated expert. So what does this premium plan include, or how is it different than our essentials plan, which does that core quarterly taxes, bookkeeping, unlimited support, and, annual taxes, is the premium plan includes unlimited one on one live meetings. So in essentials or other plan, you get great message based support from a team of experts, or this is you have one dedicated expert you can message with and then have those one on one meetings with, four quarterly check ins. So each quarter, you can meet with your dedicated expert. They'll do a detailed review of your books, finances, accounting ahead of time, send you an agenda, do the meeting together, and then after that, send you a written deliverable, a summary, to dos, what's... Goes next. Right? What's really nice about that is that time is meant for you, but what we constantly heard is we don't know what we don't know. So help us create that agenda. Right? And so you'll have that dedicated expert guiding you along the way. So schedule one of those consults if you wanna learn more. We always have our great simple practice partner discounts. It's actually our best partner discount on the market because that's how much we love our friends at simple practice. So So there's the tax packages, which you can also combine with the 20% off HEARD annual plan, which can be a savings of almost over $5,000 if you sign up on one of those premium plans. So a lot of money we save. Herds tax deductible just like simple practice. So highly recommend scheduling one of those consults. So we didn't get five minutes saved, I know, in the hour at least for questions, but... So folks who got a drop, thank you so much for for joining today. I know it was action packed with a lot of information. So encourage you watch that recording, dive into some of these resources over the next few months. Biggest piece of advice, get those bookkeeping records and all of those business expenses documented in the coming of weeks to make your tax season a lot easier. But we'll stick around for the next five, ten minutes and happy to answer any questions. Andrew, anywhere you wanna start or any ones you wanna share right off the bat. Sorry. I'm pulling this up. No. Great job, Forrest. That was a mouthful. A lot of lot of conversation there. And a couple of questions for us us on the premium plan, and Forrest put this together and launched this at Heard. So big shout out to Forrest. There's a lot of time and effort. People asked how they could upgrade if they were... There was two herd customers that were asking how they could upgrade. Great question. You can go into your billing portal and just click upgrade, your plan, which is self serve. We also just shared a few new resources today around how essentials, compares versus premium. You can also just email me, Forrest, forrest,@joinher.com. Happy to answer any of those those questions as well. And then thanks, Rachel and Shauna, for the kind words. I have a question here from Farah that I'm gonna drop over. Farah asked, what if I've been moving back and forth between a few states and had different rent, office space, etcetera? Do I just add them all together as an estimate? And this is for rent expense and home office deductions. Oh, you're asking me to answer it? I thought I was getting a break. No. Yeah. I'm just kidding. It feels like we're in a good rhythm of this right now for us. Alright. Let me let me read it as... Okay. What if I'm moving back and forth between a few states and have had different rent? Oh, this is, super common, and all you would do is you would... For... So let me break it. There's a, an easy way to think about it from a spreadsheet where column a is January, February, March, April, May, and then on the top, you have rent, Internet, etcetera. So each month, you could have different dollar amounts for the expenses. As you've been moving, I imagine each month the rent or the water or the utilities, right, has been slightly different. Totally okay. But for someone like Ufar, would highly recommend starting that tracking now just because there'll be a little bit more of the moving parts. So nothing wrong with claiming that home office duction. I would say the only exception would be is making sure in all those different locations you lived in that you met those two qualification tests that we talked about earlier. I imagine, though, in your situation, that might get a little hairy just because if some was temporary living situations or, you know, what about if some were and some were not? And so if you don't feel confident meeting the test for all the locations, would probably recommend chatting with the CPA or accountant just to be extra sure. Awesome. Thank you, Forrest. Yeah. I I just felt like we had a good, like, MC handover vibe going, so I was just rolling with it, my. guy. I'm ready. Okay. I'm... Just keep keep them coming. I love the questions on indirect expenses. They extrapolate to a couple of different areas, but how about a cell phone? Great question, Ashley. How about a cell phone device? Let's add Internet into this as an example, for monthly. cost. How do you account for the personal use versus the business use and all of that good stuff? So Internet, I would separate out and include that in your home office deduction. Right? Because that would be likely something for your home office. Now if you pay for Internet in an external office, then that would be a 100%. Right? It's separate from your home office just like if you pay for rent externally. But this is a great question with cell phone because it can apply to so many different other types of expenses. We actually had a slide about this that had to cut it out because we had too much content, But it's such... But because it applies to so many things and also just a really good reminder of how to think about, IRS bookkeeping deductions, etcetera. So short answer with the cell phone is I would say, on average, how much am I using that cell phone for business versus personal? So if my cell phone bill is a $100 a month and I use it $50.50, each month, I would log a $50 expense. Now, sure, you could pay that cell phone bill fully from your business bank account or business credit card, but then each month, you would have to split the transaction 50% business, 50% personal. So I always recommend if it's something you're splitting, it's usually easiest just to charge it personally and then add the portion that is related to your business. Right? You think about it as a very similar concept to the home office, the vehicle use we've talked about. I always... Like, there's a corny joke and say it's like, okay. If I bought 10 pens from Staples for $10 and two of them, I gave to my kid for school and I used eight, would I split the $2? My personal take, no. Right? You bought an intention of business, and that's a $2. But for the things that are recurring, more expensive, would take the time and opportunity to split it by the percentage of use. This goes back also to the vagueness we're talking about earlier of the difficultness of sometimes I'm unsure because it's kinda business, kinda not. I would say like, hey. If the IRS came knocking at your door, do you feel you have some sort of rational reason about why you, booked this as a business expense or why you determine the percentage point. At one time, someone had me ask or asked me, well, is the IRS gonna look at all my cell phone records to look at every call I made and see how many calls are business, how many are personal? And I was like, no. Right? But do you have a rational or a approach of how you got to that fifty fifty? Not some scientific essay. Right? But, like, do you feel good about what you're sharing? Because, ultimately, like, that's what it comes down to a lot with taxes is is there, like, a rational basis or reasonable basis as to why you took what you did? And the IRS sometimes is, like, genuine of, hey. We get it. Like, I understand it. I... Next year, we're not gonna let you do this because we don't feel that's the same interpretation, but it never hurts to ask. So sorry. I know that led into a little bit of a tangent, but cell phones specifically, how much are you using for business versus personal and take that percentage by the total expense? Great response there for us. And then this will be the last one we answer here from Lindsey as our teaser into the AMA for next week. If you wanted a flavor of what it's gonna feel like, here's our taste. Lindsey, great question, and then thank you for all the other questions as well. If I'm paying for travel, boarding, and conference in 2026, but the conference is in 2027, I thought this was a great question on the difference between kinda like cash basis versus accrual. Yes. I. thought you were gonna hopefully say, like, here's a sniff of our AMA, but, no. There's no sniffing. Yeah. Nice. I see Janelle laughing at least. Okay. So if I'm paying for travel, boarding, and conference 26 with the conference 27... So this is gonna depend if you're on the cash or accrual basis. And so now we have a little time, I can explain the difference. Right? So cash basis. Once the money leaves your account, you're taking it as an expense. So, technically, for this, an expense was logged for travel and boarding, so you would take it this year. The accrual basis of accounting is you recognize revenue and expenses when the service is incurred. And so you... And on accrual, you wouldn't log this until next year. Another example of accrual is if you... If I was paid, let's say, $1,000 for four sessions over the next four weeks. Accrual, I would log 2525250. Cash basis, I received the full 1,000, so I'm logging the full 1,000. So, Lindsay, the answer to your question is is assuming you're on the cash basis, which I imagine you are, I would log those expenses this year. Now for anyone who's just getting started in their practice and maybe doesn't necessarily have a profit, which is super normal for folks just getting going, you're still gonna wanna file a schedule c. Because if you have a lot of these start up expenses and don't start making more income or revenue until next year, it's actually good to have a loss because that's gonna help lower your taxes this year or you can carry over your loss to the next year. So similar kind of being a thought in terms of, like, something happening this year that may be recognized next year. Alright, Awesome. Andrew. You can close. this out. I think... I've. talked think that's. all she wrote. Big shout out to Janelle and Isabelle in the background for all of the support and getting everything set up. The simple practice team is amazing to work with. And then also Robbie and Morgan on our side who have been jamming through all of your questions. And, thank you all mostly to you for showing up and making the investment in yourself as, again, entrepreneurs, not just clinicians. We are grateful to do this work and hope to see some of you at the AMA next week on Thursday. Thursday. That's right. Okay. We will see everybody and hope you have a great rest of your day and some awesome, awesome sessions to get through this week.