Tax Deductions for New Ot Practices You Are Probably Missing

2026-08-21

Discover overlooked tax deductions for new OT practices, from home office to CEUs, with concrete steps to save money this tax season.

Starting an occupational therapy practice is expensive, and every dollar counts. But many new OT owners leave money on the table by missing tax deductions they are entitled to. This guide covers the most commonly overlooked deductions for new OT practices, with realistic figures and steps you can take this week to lower your tax bill.

Home Office Deduction

If you use part of your home regularly and exclusively for business, you can deduct it. The IRS offers two methods: the simplified method ($5 per square foot, up to 300 square feet, max $1,500) or the regular method (actual expenses like mortgage interest, utilities, and repairs, prorated by square footage). For most new OT practices, the simplified method is easier, but if your home office is large, the regular method may yield a bigger deduction. Track your home office square footage and keep a log of business use.

Action this week: Measure your office space and calculate both methods to see which gives a larger deduction.

Professional Liability Insurance

Malpractice insurance is a must for OT practices, and the premiums are fully deductible as a business expense. Typical annual premiums for OT liability insurance range from $500 to $1,500 depending on your state and coverage limits. Deduct the full amount, whether you pay monthly or annually.

Action this week: Review your insurance invoice and ensure you have a record of payment.

Continuing Education and Licensure

OTs must maintain licensure and often pursue CEUs. These costs are deductible, including registration fees, travel, lodging, and meals (subject to 50% meal limit). For example, a two-day conference costing $800 for registration, $300 for hotel, and $150 for meals can yield a deduction of $1,175 (meals at 50%). Also, state licensure fees and renewal costs are deductible.

Action this week: Gather receipts from any CEU courses or conferences you attended this year.

Marketing and Website Costs

Many new practices underestimate marketing deductions. Website design and hosting, domain names, online ads (Google, Facebook), printed brochures, and business cards are all deductible. Expect to spend $500 to $2,000 initially on a website, and $200 to $500 per month on digital ads. Track every expense, even small ones like Canva subscriptions ($12.99/month) or email marketing tools ($20 to $50/month).

Action this week: List all marketing tools you pay for monthly and add them to your expense tracker.

Office Supplies and Equipment

From printer ink to therapy tools (like resistance bands, exercise balls, and assessment kits), these are deductible. If you purchase equipment over $2,500, you may need to depreciate it, but under Section 179, you can deduct the full cost in the year of purchase for many items. For example, a new computer ($1,200) or an adjustable treatment table ($800) can be fully deducted.

Action this week: Inventory your office supplies and equipment purchases from the last year.

Software and Subscriptions

Practice management software, EHR systems, scheduling tools, and accounting software are deductible. Monthly costs range from $50 to $300 for EHR, $20 to $50 for scheduling, and $10 to $30 for accounting. Also, professional memberships (like AOTA) and journal subscriptions are deductible.

Action this week: Review your bank statements for recurring software charges.

Vehicle and Travel Expenses

If you travel to see patients at their homes or to meetings, you can deduct vehicle expenses. Use the standard mileage rate (65.5 cents per mile in 2026) or actual expenses (gas, repairs, insurance). Keep a mileage log. Also, parking fees and tolls are deductible. For example, if you drive 500 miles per month for business, that’s $327.50 per month in deductions.

Action this week: Start a mileage log in a notebook or app like MileIQ.

Health Insurance Premiums

If you are self-employed and pay for your own health insurance, you can deduct premiums for yourself, your spouse, and dependents. This deduction is taken on your personal return, not the business, but it reduces your adjusted gross income. Premiums vary widely, but a typical individual plan costs $400 to $800 per month.

Action this week: Check your health insurance statements and note the total premiums paid.

Retirement Contributions

Setting up a SEP IRA or Solo 401(k) allows you to deduct contributions. For 2026, the SEP IRA contribution limit is up to 25% of net self-employment income, capped at $69,000. A Solo 401(k) allows employee contributions up to $23,000 (plus $7,500 catch-up if over 50) and employer contributions. These deductions significantly lower your taxable income.

Action this week: Consult a financial advisor to set up a retirement plan before year-end.

FAQ

Can I deduct expenses for a home office if I also have a separate office?

Yes, if you use the home office regularly and exclusively for business, you can deduct it, even if you also have an outside office. However, the deduction is limited to the business income from your practice.

What records should I keep for vehicle deductions?

The IRS requires a contemporaneous mileage log. Record the date, miles driven, and business purpose for each trip. Apps like MileIQ can automate this.

Are meals with referral sources deductible?

Yes, business meals are 50% deductible if you discuss business and have a receipt showing the date, amount, and business relationship.

Can I deduct the cost of my therapy certification?

Yes, certification costs, including exam fees and study materials, are deductible as continuing education, as long as they maintain or improve skills required in your current business.

The bottom line

New OT practices often miss deductions that can save thousands of dollars. Start by tracking home office space, insurance premiums, CEUs, marketing, software, and vehicle miles. Use a dedicated business credit card and accounting software like QuickBooks to simplify record keeping. Consult a CPA who works with self-employed professionals to ensure you capture every deduction. The time you invest now will pay off at tax time.