Top Tax Strategies for Occupational Therapist / Speech Therapists
Deduct SE Tax
OTs and SLPs with 1099 income pay self-employment tax (15.3% on the first $184,500, 2.9% above that). The employer-equivalent half of SE tax (7.65%) is deductible as an above-the-line deduction on Schedule 1, reducing adjusted gross income regardless of whether the taxpayer itemizes.
Home Office for Telehealth
OTs and SLPs who provide telehealth services from a dedicated home office qualify for the home office deduction under §280A. The space must be used regularly and exclusively for business. The deduction covers a proportionate share of home expenses: rent/mortgage interest, utilities, internet, and home depreciation.
Solo 401(k) on Contract Income
OTs and SLPs with 1099 contract income can establish a Solo 401(k) and contribute up to $24,500 as an employee deferral (2026), plus up to 25% of net self-employment income as an employer contribution, up to a total of $70,000. This is the most powerful retirement savings tool for self-employed therapists.
Continuing Education Deductions
CEU courses, professional conferences, licensing fees, and professional association memberships (AOTA, ASHA) are deductible business expenses for self-employed OTs and SLPs. For W-2 employees, these are not deductible federally, but may be deductible in some states.
More Tax Planning FAQs
How does the S-Corp election reduce self-employment tax?
An S-Corp election allows the owner to split income between a reasonable salary (subject to 15.3% FICA on the first $176,100 in 2026) and distributions (not subject to FICA). For a business owner with $200,000 in net profit paying an $80,000 salary, the annual SE tax savings are approximately $15,500–$18,500. The S-Corp must file Form 2553 within 75 days of formation.
What is the Section 199A QBI deduction and how does it apply?
The §199A deduction allows pass-through business owners to deduct up to 23% of qualified business income (QBI) from taxable income (increased from 20% under OBBBA). For taxpayers above $403,500 (MFJ) in 2026, the deduction is limited to the greater of 50% of W-2 wages or 25% of W-2 wages plus 2.5% of qualified property. Specified Service Trades or Businesses (SSTBs) phase out above this threshold.
What retirement plan options are available for self-employed professionals?
Self-employed professionals can establish a Solo 401(k) (up to $70,000 in 2026), a SEP-IRA (25% of net self-employment income up to $70,000), a SIMPLE IRA ($16,500 + $3,500 catch-up), or a Defined Benefit Plan (up to $280,000+ depending on age). The Solo 401(k) is the best option for most self-employed professionals because it allows the highest contributions relative to income.
How does the home office deduction work for self-employed professionals?
Self-employed professionals who use a dedicated home office space exclusively and regularly for business qualify for the home office deduction under §280A. The deduction is calculated as a percentage of home expenses (mortgage interest, utilities, insurance, depreciation) equal to the office square footage divided by total home square footage. The simplified method allows $5/sq ft up to 300 sq ft ($1,500 maximum).
What vehicle deductions are available for self-employed professionals?
Self-employed professionals can deduct vehicle expenses using either the standard mileage rate (70 cents/mile in 2026) or actual expenses. Vehicles with a GVWR over 6,000 lbs qualify for §179 expensing (up to $30,500 for heavy SUVs) and bonus depreciation without luxury auto limits. A mileage log must be maintained for either method. The vehicle must be used more than 50% for business to qualify for accelerated depreciation.
What is the Augusta Rule and how can it benefit business owners?
The Augusta Rule (§280A(g)) allows homeowners to rent their primary or secondary residence to their business for up to 14 days per year. The rental income is completely tax-free to the homeowner, and the business deducts the rent as a business expense. At $2,000–$3,000/day for 14 days, this strategy generates $28,000–$42,000 of tax-free income while the business deducts the same amount.
How does cost segregation apply to business owners who own real estate?
Cost segregation reclassifies building components into shorter depreciation categories eligible for bonus depreciation. For a $1M commercial property, cost segregation typically identifies $150,000–$250,000 of accelerated depreciation, generating $60,000–$100,000 in first-year deductions at the 40% bonus depreciation rate in 2026. A cost segregation study costs $5,000–$15,000 and typically has a 10:1+ ROI.
What is the difference between a sole proprietor and an S-Corp for tax purposes?
A sole proprietor pays self-employment tax (15.3%) on all net profit. An S-Corp owner pays FICA only on their reasonable salary, saving SE tax on distributions. For a business with $200,000 in net profit, the S-Corp saves $15,000–$20,000/year in SE tax. The S-Corp has additional costs (payroll, bookkeeping, tax preparation) of $2,000–$4,000/year, making the break-even point approximately $40,000–$50,000 in net profit.
How should a self-employed professional handle estimated tax payments?
Self-employed professionals must make quarterly estimated tax payments by April 15, June 15, September 15, and January 15. The safe harbor is 100% of prior year tax (110% if prior year AGI exceeded $150,000). Failure to pay sufficient estimated taxes results in an underpayment penalty under §6654. S-Corp owners should adjust their payroll withholding to cover their estimated tax liability.
What business expenses are deductible for self-employed professionals?
Ordinary and necessary business expenses under §162 include: professional licenses and continuing education, professional liability insurance, office supplies and equipment, software subscriptions, marketing and advertising, professional association dues, business travel (flights, hotels, 50% of meals), and home office expenses. Personal expenses are not deductible even if they have some business connection.
What is the self-employed health insurance deduction?
Self-employed professionals can deduct 100% of health insurance premiums (for themselves, their spouse, and dependents) as an above-the-line deduction under §162(l). This deduction reduces AGI and is available even if the taxpayer does not itemize. The deduction is not available if the taxpayer is eligible for employer-sponsored health insurance through a spouse’s employer. S-Corp owners must include premiums in W-2 wages before claiming the deduction.
How does the net investment income tax (NIIT) affect self-employed professionals?
The 3.8% NIIT applies to net investment income (interest, dividends, capital gains, rental income, passive business income) for taxpayers with MAGI above $200,000 (single) or $250,000 (MFJ). Active business income and wages are not subject to the NIIT. Self-employed professionals who invest in rental properties or passive businesses should plan for the NIIT impact on their investment income.
