- Maryland
What Do Therapists Need to Know About Taxes in Maryland?
Starting or running a therapy practice in Maryland? This guide breaks down everything you need to know about taxes — from entity formation to local requirements and smart tax strategies. Keep more of what you earn and avoid common compliance mistakes.
Who this guide is for
This guide is for:
- Maryland-based therapists (LCSWs, LCPCs, LMFTs, psychologists, etc.)
- Solo or group practice owners
- Clinicians offering virtual, in-person, or hybrid services
- Therapists looking to stay tax-compliant and financially efficient
Step 1: Pick the right structure for your practice
Your business structure affects your taxes, liability protection, and day-to-day responsibilities.
Sole Proprietorship
- Default setup — no paperwork needed
- No liability protection
- All net income taxed on your personal return
- Easy to start, but not ideal long-term
LLC / PLLC
- Maryland allows licensed professionals to form PLLCs
- Personal liability protection
- Taxed as a sole prop by default
- Can elect S Corp status later
- Requires registration with the Maryland Department of Assessments and Taxation
S Corporation
- Pay yourself a salary and take the rest as profit
- Reduces self-employment tax liability
- More admin: payroll, corporate filings, W-2s
- Makes sense around $75K+ in net income
- Must file Maryland Form 510 annually
Professional Corporation (PC)
- Also allowed for licensed professionals
- Less flexible and more formal
- Typically used for group practices
- Can elect to be taxed as an S Corp
Step 2: Know your state tax obligations
State income tax
- Maryland has a progressive state income tax from 2% to 5.75%
- Counties and Baltimore City add an additional local income tax (ranging from ~2.25% to 3.2%)
- All business income flows through to your personal return (unless taxed as a C Corp)
Annual fees and reports
- LLCs/PLLCs and PCs must file a Personal Property Return annually
- Even if you own no tangible property, the return is required
- Missing it = penalties + loss of good standing
Local business licensing
- No state-level business license for therapists
- Local jurisdictions (especially Montgomery County, Baltimore City) may require a business license or occupancy permit
- Always check local zoning rules, especially for home offices
Step 3: Pay taxes throughout the year — not just in April
Estimated taxes
- Required if you’ll owe $1,000+
- Due quarterly: April 15, June 15, September 15, January 15
- Pay both to the IRS and Comptroller of Maryland
Self-employment tax
- Applies to sole props and default PLLCs
- 15.3% on all net income
- S Corps help reduce this — only your salary is taxed this way
Filing requirements
- Sole props: Schedule C on Form 1040 + Maryland personal tax return
- PLLCs/PCs: Annual business filing + flow-through income to personal return
- S Corps: Federal 1120S + MD Form 510
Step 4: Track and claim your deductions
Don’t leave deductions on the table — track them early and often.
Deductible expenses for therapists
- Office rent or home office (must be used exclusively and regularly)
- EHR and telehealth platforms
- Liability and malpractice insurance
- Marketing and advertising
- Professional memberships, CEUs, license renewals
- Business phone and internet
- Retirement contributions (Solo 401k, SEP IRA)
- Health insurance premiums (if self-employed)
Step 5: When it’s time to consider an S Corp
Once you’re earning enough, the S Corp structure can cut your self-employment tax burden significantly.
S Corp
- Pay yourself a salary
- Take remaining profits as distributions (not subject to self-employment tax)
- Requires payroll and separate tax returns
- Often worth it when net income exceeds $75,000
Step 6: Common mistakes therapists make
- Forgetting the annual Personal Property Return (even with no property)
- Not paying local income tax — it’s part of your Maryland return
- Not separating personal and business accounts
- Electing S Corp but failing to run payroll
- Skipping estimated tax payments
- Forming a regular LLC instead of a PLLC (required for licensed pros)
Step 7: Our recommendations by income level
Net Income Range Suggested Action
Under $50K Sole prop or PLLC is fine; make quarterly payments; use separate accounts
$50K–$100K Evaluate S Corp election; get payroll software; hire a bookkeeper or CPA
Over $100K Use full S Corp setup; plan for retirement savings; do quarterly tax reviews
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 Maryland therapists set up their business right, optimize for taxes, and stay compliant year-round — so you’re not dealing with paperwork on weekends.
Book a consult or email us at david@leichtercpa.com