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What Do Therapists Need to Know About Taxes in New York?

This guide gives licensed therapists in New York the clarity they need to handle taxes confidently — from business structure to deductions, and everything in between.

Whether you're just getting your solo practice off the ground or ready to optimize your setup, this page has you covered.


Who this guide is for

This resource is built for:

  • Licensed therapists in private practice (LCSW, LMFT, LPCC, psychologists, etc.)
  • Professionals earning income from one-on-one therapy, supervision, coaching, or consulting
  • Clinicians working independently, in a group, or in a hybrid setup
  • Anyone who wants to avoid tax surprises and keep more of what they earn

Step 1: Pick the right structure for your practice

The way you set up your business will determine how your income is taxed, what you owe, and how much paperwork you deal with.

Sole Proprietorship

  • Default setup (no paperwork needed)
  • Business and personal finances are legally the same
  • All profits taxed as self-employment income
  • Minimal admin, but no liability protection

PLLC (Professional Limited Liability Company)

  • Allowed for licensed professionals in New York
  • Offers liability protection
  • Taxed as a sole prop by default
  • Can elect S Corporation status for tax savings
  • Requires approval from the NY State Education Department
  • Must meet publication requirements after formation

S Corporation (S Corp election)

  • Can lower your self-employment taxes
  • Requires payroll, separate filings, and bookkeeping
  • Makes sense when net income hits ~$75,000+
  • Still subject to New York State filing fees and potential minimum tax

Professional Corporation (PC)

  • Also allowed for licensed professionals
  • More complex setup
  • Can elect to be taxed as an S Corp
  • Also requires NYSED approval and may not offer additional benefit over PLLC for most solo practices

Step 2: Know your state tax obligations

State income tax

  • New York uses a progressive tax system
  • Rates range from 4% to 10.9% depending on income level
  • City taxes may also apply (e.g., NYC tax is an additional 3.078% to 3.876%)

Franchise tax / minimum business fees

  • S Corps and PCs must pay a fixed franchise tax or minimum filing fee annually
  • Fee depends on New York State gross income, ranging from $25 to $4,500
  • PLLCs do not pay corporate tax but must file informational returns

Local taxes and permits

  • NYC requires separate business tax filings (e.g., Unincorporated Business Tax)
  • Local business licenses may be required depending on where you practice
  • Be mindful of overlapping state/city requirements

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

Estimated taxes

  • Due quarterly: April 15, June 15, Sept 15, Jan 15
  • Required if you expect to owe $1,000+ in tax
  • Pay both federal and New York State estimated taxes
  • Underpayment penalties apply even if you file on time

Self-employment tax

  • Federal self-employment tax rate is 15.3%
  • Applies to all net income unless you're on payroll (as an S Corp)

Filing requirements

  • PLLCs: Annual filing with NY Department of State
  • PCs and S Corps: Corporate returns (state and federal) + shareholder K-1s
  • Additional filings if you operate in NYC

Step 4: Track and claim your deductions

Therapists leave money on the table when they don’t track expenses.

Deductible expenses for therapists

  • Therapy software (EHR, billing, scheduling)
  • CEUs, license renewals, supervision costs
  • Liability and malpractice insurance
  • Office rent, home office portion
  • Phone, internet, and office supplies
  • Marketing costs (Psychology Today, website, ads)
  • Health insurance (if self-employed)
  • Retirement contributions (Solo 401k, SEP IRA)

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

  • Netting $75K or more? You might benefit from the S Corp structure
  • Pay yourself a reasonable salary, take the rest as distributions
  • Reduces self-employment tax
  • Requires bookkeeping, payroll processing, and separate tax filings
  • In New York, S Corps are subject to a fixed filing fee — still usually worth it at higher income levels

Step 6: Avoid common mistakes therapists make

  • Forming a regular LLC instead of a PLLC or PC (not permitted for licensed pros)
  • Skipping the required NY publication after forming a PLLC
  • Missing estimated tax deadlines
  • Not filing in NYC if practicing there
  • Staying a sole prop too long and overpaying taxes
  • Not tracking CEUs, supervision fees, or office expenses

Our recommendations by income level

Net Income Range

Suggested Action

Under $50K

Start as a sole prop or PLLC; track expenses; make quarterly payments

$50K–$100K

Consider electing S Corp status; start running payroll; work with a CPA

Over $100K

Full S Corp setup with payroll, retirement plan, and advanced tax strategy

Need help figuring this out?

We help therapists across New York choose the right structure, manage their taxes, and build a practice that doesn’t bury them in admin. We’ll walk you through the legal setup, sort out the numbers, and show you exactly how to pay yourself.

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.