Tax Write-Offs for New Ot Practices: The Complete List

Starting an occupational therapy (OT) practice involves significant upfront costs, but many of those expenses are tax-deductible. This guide lists the most common write-offs for new OT practices, with realistic figures for 2026, so you can reduce your taxable income and keep more of your hard-earned revenue. We’ll cover everything from startup expenses to ongoing operational costs, plus practical steps to implement this week.

1. Startup Costs (IRS Section 195)

Before your practice officially opens, you incur costs like market research, legal fees, and training. The IRS allows you to deduct up to $5,000 in startup costs in your first year, with the remainder amortized over 180 months (15 years). If your startup costs exceed $50,000, the $5,000 deduction is reduced dollar-for-dollar.

Examples of deductible startup costs:

• Business plan development
• Market analysis and surveys
• Advertising for the grand opening
• Employee training before opening
• Professional fees (accountant, attorney)
• Licenses and permits (e.g., state OT license, business registration)

Practical step: Keep receipts for all pre-opening expenses. Categorize them clearly to claim the deduction on your first tax return.

2. Equipment and Furniture

OT practices require specialized equipment, from therapy tables to exercise tools. Under Section 179, you can deduct the full cost of qualifying equipment in the year you place it in service, up to a limit (for 2026, the limit is $1,160,000, with a phase-out threshold of $2,890,000). This is a huge benefit for new practices.

Common equipment write-offs:

• Therapy tables: $500-$3,000 each
• Exercise equipment (e.g., resistance bands, weights): $200-$2,000
• Sensory integration tools: $100-$1,500
• Computer and billing software: $500-$5,000
• Office furniture (desks, chairs): $300-$2,000

Bonus depreciation: In 2026, you can also take 80% bonus depreciation on new equipment, which allows you to deduct 80% of the cost in the first year, with the remaining 20% depreciated over time.

Practical step: Purchase equipment before year-end to maximize deductions. Keep invoices and note the date placed in service.

3. Home Office Deduction

If you use part of your home exclusively and regularly for your OT practice, you may qualify for the home office deduction. There are two methods:

• Simplified method: Deduct $5 per square foot of home office space, up to 300 square feet (max $1,500).
• Regular method: Deduct actual expenses (mortgage interest, utilities, insurance) based on the percentage of your home used for business.

Requirements: The space must be used exclusively for business, and it must be your principal place of business. For OT practices, this often applies if you do administrative work at home, even if you see patients elsewhere.

Practical step: Measure your office space and calculate the percentage of your home’s total square footage. Keep a log of hours used if needed.

4. Vehicle Expenses

If you drive to see patients, visit suppliers, or run errands for your practice, you can deduct vehicle expenses. You have two options:

• Standard mileage rate: For 2026, the rate is $0.70 per mile (projected, based on 2025’s $0.70). This is simpler and often more beneficial for new practices.
• Actual expenses: Deduct gas, oil, repairs, insurance, and depreciation, multiplied by the business-use percentage.

Practical step: Maintain a mileage log with date, miles, and purpose. Use an app like MileIQ or a simple spreadsheet.

5. Professional Services

Fees you pay to professionals are deductible as ordinary business expenses. This includes:

• Accountant and tax preparer: $500-$2,000 annually
• Attorney fees: $200-$500 per hour
• Billing and coding services: $500-$1,500 per month
• Consulting fees for practice management: $100-$300 per hour

Practical step: Track all invoices from professionals and categorize them under “Professional Fees.”

6. Marketing and Advertising

To attract patients, you’ll spend on marketing. These costs are fully deductible in the year incurred.

Common marketing write-offs:

• Website design and hosting: $500-$2,000 initial, $20-$50/month hosting
• Social media ads (Facebook, Google): $300-$1,000/month
• Print materials (brochures, business cards): $100-$500
• Local SEO services: $300-$1,000/month
• Patient referral programs: Varies

Practical step: Set a monthly marketing budget and track all expenses. Use a separate credit card for business purchases to simplify.

7. Insurance Premiums

Business insurance is a necessary expense and fully deductible. Common policies for OT practices:

• Professional liability (malpractice): $500-$2,000/year
• General liability: $300-$1,000/year
• Business owner’s policy (BOP): $500-$1,500/year
• Workers’ compensation (if you have employees): $500-$2,000/year

Practical step: Review your policies annually and ensure premiums are paid from your business account.

8. Continuing Education and Licenses

OTs must maintain licenses and earn continuing education units (CEUs). These costs are deductible:

• State OT license renewal: $50-$200/year
• CEU courses and workshops: $100-$1,000 per course
• Professional association memberships (e.g., AOTA): $100-$300/year
• Subscriptions to professional journals: $50-$200/year

Practical step: Keep a folder for all CEU certificates and license renewals.

9. Office Rent and Utilities

If you lease office space, rent and utilities are deductible. This includes:

• Monthly rent: $1,000-$5,000 depending on location
• Electricity, water, internet: $200-$500/month
• Cleaning services: $100-$300/month

Practical step: Ensure your lease agreement is in the business’s name. Pay utilities from a business account.

10. Employee Salaries and Benefits

If you hire staff (e.g., OT assistants, front desk), their salaries and benefits are deductible. This includes:

• Wages: $15-$35/hour depending on role
• Payroll taxes (employer portion): 7.65% of wages
• Health insurance premiums: $500-$1,000 per employee/month
• Retirement plan contributions (e.g., SEP IRA): up to 25% of compensation

Practical step: Work with a payroll service to ensure accurate tax reporting and deductions.

FAQ

Q: Can I deduct the cost of my OT certification exam? A: Yes, the cost of the NBCOT exam and any prep courses are deductible as continuing education or professional development expenses.

Q: What if I use my personal car for business? A: You can deduct either the standard mileage rate or actual expenses, but you must keep a mileage log. The standard rate is simpler and often more beneficial.

Q: Are meals with potential referral sources deductible? A: Yes, business meals are 50% deductible if they are directly related to your practice and you discuss business. Keep receipts with names and purpose.

Q: How long do I need to keep tax records? A: Keep records for at least 3 years from the date you file your return, but for assets like equipment, keep records for the life of the asset plus 3 years.

Related guides

• 7 Mistakes New Ot Practices Make in Their First Year
• S-Corp vs LLC for New OT Practices: Which Saves More on Taxes?
• Tax Deductions for New Ot Practices You Are Probably Missing

The bottom line

New OT practices have many tax write-offs available, from startup costs to equipment and ongoing operational expenses. The key is to track every business-related expense meticulously and consult a tax professional to ensure you’re maximizing deductions legally. Start by organizing your receipts and setting up a bookkeeping system this week. With proper planning, you can significantly reduce your tax burden and reinvest those savings into growing your practice.