If you work with Luna as a physical therapist, either exclusively or for supplemental income in addition to your day job, you’re probably enjoying the flexibility and independence that comes with contract work. But remember, that level of independence also carries over into tax season. Unlike employees whose taxes are automatically deducted from their paychecks, independent contractors need to keep track of their business-related spending throughout the year, and deduct taxes from their earnings accordingly.
The good news? You don’t have to pay taxes on every dollar you work so hard to earn on your side gig. You only pay taxes on your income minus the costs of running your small business. To show these costs to the IRS, you’ll need to claim deductions on your Schedule C.Here are the top eight tax write-offs Luna therapists should keep in mind this filing season.Note: The following should not be taken as official tax or legal advice. Be sure to meet with a certified tax professional before implementing any of these suggestions. These write-offs only apply to the income you earned as an independent contractor.
Education & Licenses
When you work in a field that is continuously evolving, like physical therapy, continued education is incredibly important. Did you participate in (and pay for) any educational opportunities related to your work this year? As a self employed physical therapist, you have the potential to write off these educational expenses. From business-related books to seminars, educational classes to subscriptions to professional publications, there are lots of ways to invest in yourself and save big on your tax payments in the process. (Stay tuned for some exciting new learning and development opportunities with Luna!)
All physical therapists have licensing requirements that must be renewed on a regular basis. The majority of states require continuing education in order to renew the license. You can find out what your state requires right here. In California, for example, physical therapists are responsible for 30 hours of continued education every two years. The cost of this continued education, along with the cost of the license itself, can and should be used as a tax write-off for independent contractors. If you pursued any specialty certifications this year, these expenses will be deductible as well.
Bonus Tip: Debating whether a certain educational expense qualifies? Just make sure it “maintains or improves skills required in your present work.”
Car Mileage and Maintenance
If you spend a lot of time in your car traveling from patient to patient this year, keep this popular deduction in mind. As one of the largest deductible expenses available to contractors, car costs are important to keep track of for the self employed. There are two main ways to approach this write- off. Depending on what makes sense for your situation, you can choose to 1) deduct car expenses like insurance, maintenance, car payments, depreciation, and cost of gas, or 2) deduct a standard amount for every mile driven. This is called the standard mileage deduction. Keep in mind that these rates change every year. For example, the 2018 rate is 54.5 cents per mile.
Bonus Tip: This is one of the most common targets for the IRS, so make sure you keep good records of these expenses!
Home Office & Utilities
If part of your home is used only for business, you have an opportunity for a tax deduction. You can claim it in one of two ways: 1) Fill out Form 8829, or 2) Measure the square footage of your home office (that space that is used regularly and exclusively for work) and multiply by $5. The latter is much simpler and probably makes more sense for independent contractors.
Home office utilities, however, are also tax deductible. Anything you use in your home office (like water, power, supplies, internet, and phone data) are all eligible for deduction. If you’re using your personal cell phone for business, for example, you have the option to write off that portion of your cell phone bill. To qualify for this deduction, you’ll need to know the percentage of your plan that is used for business. To find this number, take a look at your average phone usage during a typical work week. Add up how much time was spent on business calls and how much data was used on apps used exclusively for business. You can save time by applying that average to the entire year.
Bonus Tip: Most phones now give you the option to view usage reports to help you save time collecting this data. On an iPhone, for example, go to Settings > Screen Time.
Health Insurance
The fear of not having health insurance provided by an employer is one of the main reasons employees avoid making the jump into self employment. What they may not know is that 100% of health insurance premiums you pay for you, your spouse, and any dependents are tax deductible for independent contractors. Don’t miss this huge tax saving opportunity!
Bonus Tip: Be sure to keep track of your medical bills and health insurance premiums! Starting in 2019, you may be able to deduct medical expenses that exceed 10% of your income. Ask your tax professional for more information if this applies to you.
Advertising
Did you create a website this year to promote your personal brand or business? Hire a freelance copywriter to help you get the words just right? Print off your very own business card? All of these are considered advertising costs and they are fully tax deductible. Of course, at Luna, we cover patient marketing for you, but it never hurts to get your name out there and establish your brand.
Bonus Tip: if you’ve established a sole proprietorship, you’ll claim this expense deduction in your Schedule C under line 8.
Learn more about Luna and how we’re empowering physical therapists like you by offering independence and control.
