- Indiana
What Do Therapists Need to Know About Taxes in Indiana?
Indiana has a flat state income tax and relatively simple compliance rules — but you still need a solid tax setup to avoid overpaying and missing deadlines. This guide walks therapists in Indiana through entity options, deductions, and how to stay tax-ready year-round.
Who this guide is for
This guide is for:
- Licensed Indiana therapists (LMHCs, LCSWs, LMFTs, psychologists, etc.)
- Solo practitioners, group practice owners, and contractors
- Therapists providing in-person, virtual, or hybrid services
- Clinicians who want to avoid penalties and keep more of their income
Step 1: Pick the right structure for your practice
Your structure affects how you’re taxed, how you pay yourself, and what paperwork you deal with.
Sole Proprietorship
- No state registration required unless you use a trade name (DBA)
- All profits taxed as personal income
- Easiest to manage, but no liability protection
PLLC (Professional LLC)
- Indiana allows licensed professionals to form PLLCs
- Provides personal liability protection
- Default tax status: pass-through (like sole prop)
- Can elect S Corp status to reduce self-employment tax
- Register with Indiana Secretary of State + notify licensing board
S Corporation
- Allows you to split income between salary and distributions
- Cuts self-employment tax, but adds complexity (payroll, extra filings)
- Becomes worthwhile when net income exceeds ~$75K
- Still subject to Indiana state income tax
Professional Corporation (PC)
- Permitted in Indiana
- More admin required — better suited for groups
- Can be taxed as an S Corp if elected
Step 2: Know your state tax obligations
State income tax
- Indiana has a flat income tax rate of 3.15% for 2025
- All personal and pass-through income is taxed at this rate
- File using Form IT-40 (residents) or IT-40PNR (non-residents)
County income tax
- Indiana counties charge additional income tax on top of the state rate
- Rates vary by county (typically 1–3%)
- Your tax return automatically calculates this based on your residence
Annual business entity report
- Required for PLLCs and PCs
- Due every other year
- $50 filing fee
- File via Indiana INBiz portal
Business license
- Indiana doesn’t require a statewide license for therapists
- Local cities or counties may have zoning or permit rules
Step 3: Pay taxes throughout the year — not just in April
Estimated taxes
- Required if you expect to owe $1,000+ in state or federal taxes
- Due: April 15, June 15, Sept 15, Jan 15
- Use Form ES-40 or pay online for Indiana
Self-employment tax
- Applies to net income from sole props and default PLLCs
- 15.3% for Social Security and Medicare
- S Corp helps lower this tax burden
Filing requirements
- Sole prop: Schedule C + Indiana IT-40
- PLLC: Biennial report + IT-40 + federal taxes
- S Corp: 1120-S + Indiana IT-20S + payroll + state/county income tax
Step 4: Track and claim your deductions
Deductions matter — especially for federal tax savings.
Deductible expenses for therapists
- EHR, scheduling, and telehealth platforms
- License renewals, CEUs, supervision
- Rent or home office
- Malpractice insurance
- Phone, internet, admin tools
- Marketing and directories
- Retirement plan contributions
- Self-employed health insurance
Step 5: When it’s time to consider an S Corp
The S Corp structure helps reduce taxes — if you’re earning enough to justify the extra work.
S Corp
- Pay yourself a reasonable salary
- Take remaining profits as distributions
- Avoid self-employment tax on the distribution portion
- Still pay Indiana state and county income tax on all income
- Must run payroll and file corporate returns
Step 6: Common mistakes therapists make
- Ignoring county income tax and underpaying
- Forgetting the biennial report for PLLCs
- Waiting too long to elect S Corp
- Not filing estimated taxes
- Skipping deductions for CEUs, rent, and software
- Using personal accounts for business expenses
Step 7: Our recommendations by income level
Net Income Range Suggested Action
Under $50K Sole prop or PLLC; keep it simple; file county tax correctly
$50K–$100K Consider S Corp election; start payroll; review quarterly with CPA
Over $100K Full S Corp setup; max out deductions; tax planning is essential
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.
Need help figuring this out?
We help Indiana therapists navigate income and county taxes, file cleanly, and avoid common compliance mistakes.
Book a consult or email us at david@leichtercpa.com