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What Do Therapists Need to Know About Taxes in Idaho?

Idaho may be low-frills when it comes to taxes — but that doesn’t mean it’s simple. If you're running a therapy practice here, you'll need to keep up with state income tax, business registrations, and the occasional quirks around sales tax or local requirements.


Who this guide is for

This guide is for:

  • Licensed Idaho therapists (LCSWs, LPCs, LMFTs, psychologists, etc.)
  • Solo and group practice owners
  • Providers working in-person, online, or both
  • Therapists looking to minimize tax liability and stay compliant

Step 1: Pick the right structure for your practice

Your business entity controls how you’re taxed and what paperwork you’ll file.

Sole Proprietorship

  • Easiest to start — no entity formation required
  • Profits taxed as personal income
  • Offers no personal liability protection
  • Must register a DBA if operating under a trade name

PLLC (Professional LLC)

  • Idaho allows licensed professionals to form PLLCs
  • Offers liability protection
  • Default tax treatment: pass-through to personal return
  • Can elect S Corp status for potential tax savings
  • Requires registration with the Idaho Secretary of State and coordination with licensing board

S Corporation

  • Helps reduce self-employment tax by splitting salary and distributions
  • Requires payroll setup, bookkeeping, and separate tax filings
  • Makes sense once you’re netting around $75K/year
  • Still subject to Idaho personal income tax

Professional Corporation (PC)

  • Permitted in Idaho
  • More admin overhead
  • May be taxed as S Corp with election
  • More common for larger practices

Step 2: Know your state tax obligations

State income tax

  • Idaho has graduated personal income tax rates, capped at 5.8% for 2025
  • All income from pass-through entities flows to your individual return
  • File using Form 40 (residents) or Form 43 (non-residents)

Annual report

  • Required for PLLCs and PCs
  • Due annually to the Idaho Secretary of State
  • $20 filing fee — file online

Sales tax

  • Therapy services are generally exempt from sales tax
  • However, if you offer non-healthcare services (e.g., coaching, classes, products), consult with a tax advisor
  • Sales tax rate: 6% statewide, with some local add-ons

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

Estimated taxes

  • Required if you expect to owe $1,000+ to IRS or $200+ to Idaho
  • Due quarterly: April 15, June 15, Sept 15, Jan 15
  • File Idaho estimates using Form 51 or via tax.idaho.gov

Self-employment tax

  • 15.3% for Social Security and Medicare
  • Applies to net income from sole props and default PLLCs
  • S Corp helps reduce this by splitting income

Filing requirements

  • Sole prop: Schedule C + Idaho Form 40
  • PLLC: Annual report + personal income return
  • S Corp: 1120-S + Idaho Form 41S + W-2s + annual report

Step 4: Track and claim your deductions

Idaho therapists have access to the same deductions as other self-employed professionals — you just need to keep records.

Deductible expenses for therapists

  • Office rent or eligible home office
  • HIPAA-compliant telehealth and billing software
  • Malpractice and liability insurance
  • License renewals, CEUs, supervision
  • Marketing, website, and directories
  • Phone, internet, admin tools
  • Retirement contributions
  • Health insurance premiums

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

If your net income is above $75K, you’re likely overpaying in self-employment tax.

  • S Corp lets you pay a salary and take the rest as distributions
  • Reduces self-employment tax on part of your income
  • Requires payroll, separate tax return, and formal bookkeeping
  • Still pays Idaho state income tax on total income

Step 6: Common mistakes therapists make

  • Forgetting the $20 annual report for PLLCs and PCs
  • Not registering a trade name (DBA) when using a business name
  • Missing quarterly estimated payments
  • Staying a sole prop too long
  • Electing S Corp but skipping payroll setup
  • Ignoring non-therapy income that may be subject to sales tax

Step 7: Our recommendations by income level

Net Income Range

Suggested Action

Under $50K

Sole prop or PLLC; file annual report; track every deduction

$50K–$100K

Consider S Corp; run payroll; review quarterly with CPA

Over $100K

Full S Corp setup; retirement plan strategy; tax planning essential

Need help figuring this out?

We help Idaho therapists form the right business structure, reduce self-employment tax, and stay current with all state 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.