- Virginia
What Do Therapists Need to Know About Taxes in Virginia?
Building a therapy practice in Virginia? Good. Now let’s make sure you’re structured correctly, paying the right taxes, and not leaving money on the table. This guide breaks down what licensed therapists in Virginia need to know about taxes.
Who this guide is for
This guide is for:
- Virginia-based therapists (LCSWs, LPCs, LMFTs, psychologists, etc.)
- Solo or group practice owners
- Clinicians offering in-person or virtual sessions
- Anyone looking to avoid tax issues, overpayments, or setup mistakes
Step 1: Pick the right structure for your practice
Your business entity affects your taxes, liability protection, and administrative load.
Sole Proprietorship
- No registration needed unless using a trade name
- Income reported on your personal tax return
- No legal distinction between you and your business
- No liability protection
LLC / PLLC
- Virginia allows licensed professionals to form PLLCs
- Offers personal asset protection
- Default tax status: pass-through income
- Can elect S Corp status later if income supports it
- Must register with the Virginia State Corporation Commission
S Corporation
- Reduces self-employment tax by splitting income into salary + profit
- Requires payroll, W-2, and separate business tax filings
- Makes sense when your net income is $75K or higher
- Still pays personal income tax at Virginia’s graduated rates
Professional Corporation (PC)
- Permitted in Virginia
- Less common unless forming a larger group practice
- Can elect S Corp status to reduce tax burden
- Requires approval from licensing board and state corporation authority
Step 2: Know your state tax obligations
State income tax
- Virginia uses a progressive rate from 2% to 5.75%
- Applies to pass-through income from sole props, PLLCs, and S Corps
- Paid through personal income tax returns (Form 760)
Business licenses & local taxes
- No state business license required, but most cities/counties require a local business license
- Localities may charge a Business, Professional, and Occupational License (BPOL) tax
- BPOL is based on gross receipts — not profit — so it hits early-stage practices hard in some areas
Franchise tax or annual fees
- No state franchise tax
- PLLCs and PCs must file an annual report and pay a $50 fee to the SCC
Step 3: Pay taxes throughout the year — not just in April
Estimated taxes
- Required if you’ll owe $1,000+ in combined federal and state income tax
- Due quarterly: April 15, June 15, September 15, January 15
- Pay both to the IRS and Virginia Department of Taxation
Self-employment tax
- Applies if you're a sole prop or default PLLC
- Covers Social Security and Medicare at 15.3%
- You reduce this burden by electing S Corp status and running payroll
Filing requirements
- Sole props: Schedule C on federal return + VA Form 760
- PLLCs: Annual report + federal/VA pass-through income
- S Corps: Federal 1120S + VA 502 for pass-through entities
Step 4: Track and claim your deductions
You can’t deduct what you don’t track. Keep receipts and records for:
Deductible expenses for therapists
- Office rent or home office percentage
- EHR and scheduling platforms
- Professional liability insurance
- CEUs, license renewal fees, supervision costs
- Business phone and internet
- Advertising (Psychology Today, website, local listings)
- Solo 401k or SEP IRA contributions
- Self-employed health insurance premiums
Step 5: When it’s time to consider an S Corp
Once you’re consistently netting $75K+, you’re probably overpaying on self-employment taxes.
- S Corp lets you pay yourself a salary and take the rest as profit
- Only the salary is subject to employment taxes
- You must run payroll, file W-2s, and stay on top of corporate filings
- Still subject to Virginia state income tax on all income
Step 6: Avoid common mistakes therapists make
- Skipping local business license requirements (especially BPOL tax)
- Forgetting to pay estimated taxes quarterly
- Staying a sole proprietor too long
- Not running payroll after electing S Corp
- Missing annual reports and renewal fees with the state
- Failing to separate personal and business expenses
Step 7: Our recommendations by income level
Net Income Range Suggested Action
Under $50K Sole prop or PLLC is fine; focus on clean books and quarterly taxes
$50K–$100K Consider S Corp; start payroll; reduce SE tax
Over $100K Full S Corp setup; max out retirement; do tax planning quarterly
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 work with therapists across Virginia to handle the setup, keep you compliant, and help you make the most of your income — without burnout or confusion.
Book a consult or email us at david@leichtercpa.com