- Ohio
What Do Therapists Need to Know About Taxes in Ohio?
Running a therapy practice in Ohio comes with a mix of state-level income taxes, optional municipal filings, and structure-specific nuances. This guide walks you through how to legally reduce your tax burden while staying compliant.
Who this guide is for
This guide is for:
- Licensed therapists in Ohio (LISWs, LPCCs, MFTs, psychologists, etc.)
- Solo or group practice owners
- Clinicians seeing clients in-person, online, or both
- Anyone wanting to avoid tax headaches and make confident business decisions
Step 1: Pick the right structure for your practice
Choosing the right legal structure affects how you’re taxed and protected.
Sole Proprietorship
- Easiest setup — no registration unless you use a trade name
- Profits taxed on your personal return
- No legal separation between you and the business
- Risky long-term, but fine for starting out
Professional Corporation (PC)
- Ohio allows PCs for licensed professionals
- Less common for solo practices due to rigid formalities
- Can be taxed as S Corp
- Must comply with Ohio Accountancy Board if offering supervisory services
LLC / PLLC
- Ohio allows licensed professionals to form PLLCs
- Offers personal liability protection
- Taxed as a sole prop by default
- You can elect S Corp later if income justifies it
- Must register with the Ohio Secretary of State
S Corporation
- Lets you split income between salary and profit
- Only the salary is subject to employment taxes
- Requires payroll, bookkeeping, and corporate filings
- Typically beneficial at $75K+ net income
- Must file with the IRS and submit appropriate business returns in Ohio
Step 2: Know your state tax obligations
State income tax
- Ohio has a graduated state income tax ranging from 2.75% to 3.5% (2024 figures)
- Income from sole props, PLLCs, and S Corps flows through to your personal return
- Most therapists will file Form IT 1040 for state taxes
Commercial Activity Tax (CAT)
- Businesses grossing over $150,000 annually must register for CAT
- Applies to gross receipts, not profit
- First $1 million is taxed at a minimum fee of $150
- Income over that is taxed at 0.26%
Local / municipal taxes
- Ohio municipalities have local income taxes that must be filed separately
- Examples: Columbus, Cleveland, Cincinnati — each with their own rate (typically 1.5%–2.5%)
- Often handled via RITA or CCA filing portals
Step 3: Pay taxes throughout the year — not just in April
Estimated taxes
- Required if you’ll owe $500+ to Ohio or $1,000+ to the IRS
- Quarterly payments due: April 15, June 15, Sept 15, Jan 15
- Pay to both Ohio Department of Taxation and the IRS
Self-employment tax
- 15.3% federal SE tax on all net income (sole props and default PLLCs)
- Electing S Corp can reduce this burden via payroll planning
Filing requirements
- Sole props: Schedule C on federal return + IT 1040 for state
- PLLCs/PCs: Annual renewal with Secretary of State + applicable local filings
- S Corps: Federal 1120-S + Ohio IT 1140 and CAT if applicable
Step 4: Track and claim your deductions
Your ability to deduct expenses directly impacts your tax liability — but you need receipts and records.
Deductible expenses for therapists
- Therapy software (EHR, scheduling, telehealth)
- Office rent or home office deduction
- CEUs, license renewals, supervision fees
- Business insurance (malpractice, liability)
- Phone, internet, marketing, and advertising
- Retirement plans (Solo 401k, SEP IRA)
- Health insurance (if self-employed)
Step 5: When it’s time to consider an S Corp
Once your practice is reliably netting $75K+, it’s time to run the numbers.
- S Corps let you pay yourself a salary (subject to payroll tax)
- Remaining profits = distributions, not subject to self-employment tax
- More admin required — but often saves thousands annually
- Still subject to state income tax, local tax, and CAT if thresholds are met
Step 6: Common mistakes therapists make
- Not registering for CAT when gross receipts cross $150K
- Skipping municipal/local tax filings
- Staying a sole prop too long and overpaying self-employment tax
- Electing S Corp but not running payroll
- Ignoring business vs. personal expense separation
- Missing annual renewal with Secretary of State
Step 7: Our recommendations by income level
Net Income Range Suggested Action
Under $50K Sole prop or PLLC is fine; track expenses; register for CAT if over $150K gross
$50K–$100K Consider S Corp; start payroll; file quarterly tax estimates
Over $100K Full S Corp setup; plan around CAT, local taxes, and retirement savings
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 Ohio-based therapists make sense of CAT, local taxes, entity setup, and all the tax traps that come with private practice. We’ll build a plan that saves you money and time.
Book a consult or email us at david@leichtercpa.com