What Taxes Does a New Speech Therapy Practice Pay? A Complete Guide

Starting a speech therapy practice means taking on new business responsibilities, and taxes are among the most important. You will owe federal income tax, self-employment tax, and possibly state and local taxes. This guide breaks down each tax, what it costs, and how to handle it in your first year.

Federal Income Tax

Your practice’s profits are subject to federal income tax. The rate depends on your total taxable income, which includes your practice profits plus any other income. For 2026, the federal income tax brackets for single filers are:

• 10% on income up to $11,600
• 12% on income from $11,601 to $47,150
• 22% on income from $47,151 to $100,525
• 24% on income from $100,526 to $191,950
• 32% on income from $191,951 to $243,725
• 35% on income from $243,726 to $609,350
• 37% on income over $609,351

For married filing jointly, the brackets are roughly double. You pay only the rate for each portion of income, not the top rate on all of it. Most new speech therapy practices start in the 12% or 22% bracket.

Self-Employment Tax

As a sole proprietor or single-member LLC, you are self-employed. You must pay self-employment tax, which covers Social Security and Medicare. The rate is 15.3% of your net earnings, calculated as:

• 12.4% for Social Security on earnings up to $176,100 (2026 limit)
• 2.9% for Medicare on all earnings

You can deduct half of the self-employment tax when calculating your adjusted gross income. For example, if your practice nets $60,000, you owe about $9,180 in self-employment tax, and you can deduct $4,590.

State and Local Taxes

Most states levy an income tax on your practice profits. Rates vary widely:

• States with no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming
• States with flat rates: Colorado (4.4%), Illinois (4.95%), Indiana (3.05%), Massachusetts (5%), Michigan (4.25%), North Carolina (4.75%), Pennsylvania (3.07%), Utah (4.85%)
• States with progressive rates: California (1% to 13.3%), New York (4% to 10.9%), New Jersey (1.4% to 10.75%), and others

Some cities and counties also impose local income taxes, such as New York City (up to 3.876%) or Philadelphia (3.75%). Check your state’s department of revenue website for specifics.

Sales Tax on Services

Speech therapy services are generally exempt from sales tax in most states, but not all. For example, in New York, speech therapy is exempt if provided by a licensed professional. In Texas, medical services are exempt, but you must have a sales tax permit if you sell products like therapy materials or equipment. In states like Hawaii, New Mexico, and South Dakota, some professional services may be taxable. Check your state’s rules to avoid surprises.

Employment Taxes

If you hire employees, you must withhold and pay payroll taxes. These include:

• Federal income tax withholding (based on employee W-4)
• Social Security and Medicare (FICA): 6.2% and 1.45% each for employee and employer, plus 0.9% additional Medicare on high earners
• Federal unemployment tax (FUTA): 6% on the first $7,000 per employee, but you get a credit for state unemployment taxes, often reducing it to 0.6%
• State unemployment tax (SUTA): varies by state, typically 1% to 6% of wages

You must register for an Employer Identification Number (EIN) and file quarterly payroll tax returns (Form 941).

Estimated Quarterly Taxes

The IRS expects you to pay taxes as you earn income. Since you don’t have an employer withholding, you must make estimated tax payments quarterly. Deadlines are typically:

• April 15
• June 15
• September 15
• January 15 of the following year

If you owe more than $1,000 at tax time, you may face penalties for underpayment. To avoid this, pay at least 100% of last year’s tax liability (or 90% of this year’s) in four equal installments. Use Form 1040-ES to calculate and pay.

Tax Deductions for Your Practice

You can reduce your taxable income by claiming legitimate business expenses. Common deductions for speech therapy practices include:

• Office rent or home office deduction (simplified rate is $5 per square foot, up to 300 square feet)
• Equipment and supplies (therapy materials, assessment tools, computer, printer)
• Professional liability insurance premiums
• Continuing education courses and licensing fees
• Marketing and website costs
• Health insurance premiums for yourself and your family (deductible on your personal return)
• Retirement plan contributions (SEP IRA, Solo 401(k))
• Business use of your car (standard mileage rate for 2026 is 67 cents per mile)

Keep receipts and track expenses in a separate business account.

How to File Your Taxes

Follow these steps to stay compliant:

1. Get an EIN from the IRS website, even if you’re a sole proprietor. It’s free and takes minutes.
2. Open a business bank account and use it for all practice income and expenses.
3. Track income and expenses using accounting software like QuickBooks or a simple spreadsheet. Update it monthly.
4. Set aside 25% to 30% of each payment for taxes. Put it in a separate savings account.
5. Make estimated tax payments using the IRS Direct Pay system or EFTPS.
6. File your annual return (Form 1040 with Schedule C and Schedule SE) by April 15. If you need more time, file Form 4868 for an automatic 6-month extension, but pay any taxes owed by the original deadline.
7. Pay state taxes according to your state’s schedule, often quarterly or annually.

FAQ

Do I need to charge sales tax on speech therapy sessions? In most states, no, because speech therapy is a medical service. But if you sell products like therapy workbooks or equipment, you may need to collect sales tax. Check your state’s department of revenue.

Can I deduct my home office if I see clients at home? Yes, if you use a space exclusively and regularly for business. The simplified method gives $5 per square foot up to 300 square feet, or you can use actual expenses. If you see clients in that space, it must meet the exclusive use test.

What happens if I miss an estimated tax payment? You may owe an underpayment penalty, which is calculated based on the amount and how long it was unpaid. The penalty is roughly 5% per month, but the IRS often waives it if you show reasonable cause. Pay as soon as possible to minimize penalties.

Should I form an LLC or S-corp to save on taxes? A single-member LLC doesn’t change your federal taxes; you still file Schedule C. An S-corp can save on self-employment tax by paying yourself a reasonable salary and taking the rest as distributions, but it adds payroll and filing costs. For most new practices earning under $100,000, a sole proprietorship or LLC is simpler and cheaper.

The Bottom Line

As a new speech therapy practice owner, you pay federal income tax, self-employment tax, and possibly state and local taxes. Sales tax and employment taxes apply in specific situations. The key to managing taxes is to track everything, set aside money quarterly, and file on time. Start by getting an EIN, opening a business account, and setting up a simple bookkeeping system. With these steps, you can avoid penalties and keep more of your hard-earned income.

Related guides

• S-Corp vs LLC for New Speech Therapy Practices: Which Saves More on Taxes?