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What Do Therapists Need to Know About Taxes in Connecticut?

Connecticut has one of the higher personal income tax rates in the country — and that makes structuring your therapy practice correctly even more important. From estimated tax payments to annual filings and entity selection, here’s what Connecticut therapists need to know.


Who this guide is for

This guide is for:

  • Licensed Connecticut therapists (LCSWs, LMFTs, LPCs, psychologists, etc.)
  • Solo practice owners, group practice owners, or contractors
  • Clinicians working in-person, via telehealth, or hybrid
  • Anyone looking to avoid penalties and keep more of what they earn

Step 1: Pick the right structure for your practice

Connecticut offers several legal entities — your pick affects how you pay taxes.

Sole Proprietorship

  • Default setup if you don’t form a legal entity
  • Easy to manage, but offers no liability protection
  • Profits taxed on your federal and Connecticut personal return

PLLC (Professional LLC)

  • Connecticut allows licensed professionals to form PLLCs
  • Offers personal liability protection
  • Default taxation: pass-through (like sole prop)
  • Can elect S Corp status once income grows
  • Must register with the Connecticut Secretary of State and comply with your licensing board

S Corporation

  • Allows you to pay yourself a salary and take distributions — cutting self-employment tax
  • Requires running payroll, corporate filings, and admin compliance
  • Often makes sense when net income exceeds ~$75K
  • Still subject to Connecticut income tax

Professional Corporation (PC)

  • Also allowed in Connecticut
  • Must comply with corporate governance rules
  • Can elect S Corp treatment
  • Used more often for group practices or partnerships

Step 2: Know your state tax obligations

State income tax

  • Connecticut has graduated rates from 3% to 6.99%
  • Tax applies to all personal and pass-through business income
  • File on Form CT-1040 (individual) or CT-1065 / CT-1120SI (entity)

Business Entity Tax

    • Repealed as of 2020 — no longer applies
  • However, S Corps and partnerships must still file annual informational returns
  • Franchise taxes may apply for C Corps or non-pass-through entities

Annual report

  • PLLCs and PCs must file an annual report with the Secretary of State
  • Due each year based on formation date
  • $80 filing fee for LLCs

Local business licenses

  • Connecticut doesn’t have a statewide license requirement
  • Check with your city or town for local license or zoning regulations

Step 3: Pay taxes throughout the year — not just in April

Estimated taxes

  • Required if you’ll owe $1,000+ in federal or $1,000+ in state income taxes
  • Due: April 15, June 15, Sept 15, Jan 15
  • Pay Connecticut estimates using Form CT-1040ES or online

Self-employment tax

  • 15.3% for Social Security and Medicare
  • Applies to all net income from sole props and default PLLCs
  • S Corps help reduce this by separating salary from distributions

Filing requirements

  • Sole prop: Schedule C + CT-1040
  • PLLC: Annual report + CT personal return
  • S Corp: 1120-S + CT-1120SI + payroll reports + annual report

Step 4: Track and claim your deductions

Connecticut taxes income, not revenue — so tracking deductions is key.

Deductible expenses for therapists

  • Rent or home office expenses
  • Malpractice and liability insurance
  • Telehealth/EHR software
  • Licensing and CEUs
  • Marketing and advertising
  • Phone, internet, and admin tools
  • Retirement contributions
  • Self-employed health insurance

Step 5: When it’s time to consider an S Corp

A solid option for therapists earning $75K+ net income.

  • Reduces self-employment tax by splitting income
  • Requires payroll and separate tax filings
  • Still subject to Connecticut income tax
  • More work, but the tax savings add up quickly

Step 6: Common mistakes therapists make

  • Forgetting to file the annual report with the Secretary of State
  • Waiting too long to elect S Corp
  • Not running payroll after S Corp election
  • Skipping estimated tax payments
  • Not tracking CEUs, home office, or software expenses
  • Mixing business and personal bank accounts

Step 7: Our recommendations by income level

Net Income Range

Suggested Action

Under $50K

Stay as sole prop or PLLC; pay estimates; file annual report

$50K–$100K

Consider S Corp; run payroll; tighten deductions

Over $100K

Maximize S Corp benefits; add retirement planning; CPA advisory

Need help figuring this out?

We help Connecticut therapists pick the best entity, cut self-employment tax, and make sense of state and federal requirements.

Book a consult or email us at david@leichtercpa.com

Disclaimer: This guide is for informational purposes only and does not constitute legal, tax, or financial advice. While we make every effort to keep the content accurate and up to date, state laws and regulations can change without notice. You should consult a licensed professional in your state before making any decisions based on this information. Leichter Accounting Services is not liable for any errors or omissions, or for any actions taken based on the contents of this guide.