Is Going to Therapy Tax Deductible?
Having to undergo therapy can be a very costly endeavor. However, some therapy types may allow you to deduct some of the associated costs from your taxable income when you file your tax report. That being said, the answer to the question “Is going to therapy tax deductible” is a bit more complicated than simple yes or no. Sometimes, you may be able to deduct even the best affordable online counseling, but you may not be able to deduct other treatment programs. Therapy tax deductions are all about qualified medical expenses and how the IRS views them. In this article, we are going to provide you with all the information you might need to figure out whether your therapy expenses are tax deductible or not.
When is therapy tax deductible, and when is it not?
For the most part, going to therapy is tax deductible. However, there are strict rules and regulations that govern how these deductions are handled. First, there is a distinction between who goes to therapy. Here, we can observe two notable cases:
- Therapy for clients
- Therapy for professional therapists
There is one thing that stays the same regardless of whether you are a client seeking the best online anxiety treatment or a professional therapist going to therapy to further their business. You are only able to deduct the cost of therapy if you use your own money (out-of-pocket) to pay for it. If your insurance provider pays for your therapy, you cannot deduct those expenses when filing your taxes.
Furthermore, the therapy itself needs to qualify for deductible medical expenses (in the case of the client) or qualified business expenses (in the case of the therapist). The IRS definition of qualified medical expenses says that they “must be primarily made to alleviate or prevent a physical or mental disability or illness.” That means that expenses that are merely beneficial to your overall health can not be deducted as qualified medical expenses.
Here’s an example to illustrate both points. Let’s say that you’ve spent $5,000 in total on your therapy. The cost of the treatment itself was $3,000, and you spent $2,000 more on a vacation that was recommended by your treatment provider. Now, let’s say that your insurance covered the treatment costs for $2,000. In this case, you will be able to deduct only $1,000 in qualified medical expenses. You will not be able to deduct vacation expenses.
However, in reality, it is a lot more complicated than that.
Therapy for clients
The amount of money that you can deduct is directly related to your AGI (Adjusted Gross Income). In fact, the only way you can benefit from therapy tax deductions is if the total cost of the therapy (for that particular year) exceeds 7.5% of your AGI. Furthermore, the therapy itself needs to be part of the necessary medical treatment. What counts as necessary is quite vague, however, and the IRS deals with therapy tax deductions on a case-by-case basis. For example, one person might be able to deduct the cost of online CBT therapy while another might not. In some cases, it might all come down to representation, as well. Therefore, if you want to have the best chance of being able to deduct the cost of your therapy, you might want to get in touch with a certified tax professional.
But, as a rule of thumb, if the therapy deals with very specific issues that negatively impact your life and is, therefore, necessary, you will most likely be able to deduct the costs on your tax return.
Therapy for professional therapists
When it comes to professional therapists going to therapy, there are no AGI limitations. However, you need to prove to the IRS that the therapy you are undergoing is going to help you do your job well, and continue to do it well. The fact of the matter is that professional therapists quite often need therapy services due to their job. You may want to navigate your own challenges or simply to keep in touch with how it feels to be on “the other side”. Or you might want to attend the best online therapy for depression and pick up a few pointers. Regardless of the reason, however, you are investing in your business by going to therapy. You are the primary asset of your practice, after all, and anything that helps you do your job better can be considered a business expense.
Types of therapy that might be tax deductible
For the most part, the IRS does not specify which therapy types are able to be deducted and which are not. In practical terms, however, there are four therapy types that have a much higher chance of being tax-deductible than others. The types are:
- Mental health therapy
- Physical health therapy
- Nontraditional therapy
- Therapy animals
It is also worth noting that the quality of the therapy does not have anything to do with whether therapy is tax deductible or not. Whether you attend the best online therapy for OCD or visit an inexperienced therapist, the therapy itself will be considered a necessary medical expense. However, simply saying that all these therapy types are tax deductible is not fully true. There are some limitations to consider.
Is mental health therapy tax deductible?
According to the IRS, any treatment that is administered by licensed psychiatrists and psychologists is tax-deductible. Furthermore, even visiting a non-licensed counselor may be eligible for the deduction, but it varies from one case to another. Considering that some of the best online therapy for teens programs may utilize such counselors, it may be worth your while to check with a tax professional whether you or your loved one qualifies for these deductions.
More importantly, all costs associated with treating alcoholism and drug addiction are fully deductible. You can deduct meals, lodgings, treatment programs, etc. Occupational therapy is tax-deductible as well, provided that the therapy targets either a mental or physical condition. If this form of therapy targets a specific circumstance, you might not be able to deduct its costs.
Is physical health therapy tax deductible?
When it comes to physical therapy, the rule is rather simple: Any therapy that addresses a physical ailment that is interfering with your life is tax deductible. However, this statement is inherently vague. Some people may consider a body blemish that can only be corrected with plastic surgery to be interfering with their lives. It is usually better to talk to tax professionals before undergoing any sort of physical treatment that might be “iffy” in regard to tax deductions. That way, you may avoid having to hire one of the best tax defense companies to help you out of the resulting mess.
Nontraditional therapy might also be tax deductible
The IRS also recognizes a few “nontraditional” therapy types as qualified medical expenses. The terms themselves are rather vague, simply stating “Other qualified medical practitioners”. However, some practices are usually accepted, including:
- Christian Science
All these treatment types have one thing in common, which allows them to be considered as qualified medical expenses: They all provide diagnosis, cure, mitigation, treatment, or prevention of disease in their own way. That being said, it is entirely possible that you be denied the opportunity to deduct the cost for nontraditional therapy types. Again, the best thing you can do is to consult with a tax professional before you undergo therapy.
You can deduct some of the therapy animal costs
It is possible to deduct any of the costs associated with keeping a service animal but only in two distinct cases. The animal needs to be there to help you with either a hearing or a visual impairment. Unfortunately, this means that the costs associated with a “comfort animal”, such as those utilized in some PTSD treatments, are not tax deductible. Unless, of course, you happen to have a vision or audio impairment as well. Notable costs associated with keeping a service animal include its purchase, food, grooming, and veterinary care.
How to deduct therapy on your tax return
Let’s say that you’ve established that you are entitled to a tax deduction for your therapy cost. Before you can claim the deduction, you will need to consider the following factors:
Of course, you will need to have paid for the therapy costs during the tax year you are filing the report. Do note that there is a significant distinction between “incurred costs” and “paid costs”. It does not matter (for tax purposes) when you attended treatment; what does matter is when you paid for it. For example, you may have undergone your treatment in 2021 but actually paid for it in 2022. This means that you can only utilize the deduction in the tax year of 2022 and not 2021.
Itemizing therapy tax deductions
Claiming therapy tax deductions is done under Schedule A. This means that you will need to itemize your deductions and not take the standard deduction. If you normally take the standard deduction, you will need to file a new form, Schedule A (Form 1040), instead of your standard procedure.
Limitations and calculations
As mentioned previously, if you are not a professional therapist, you can only deduct qualified medical expenses up to the amount that exceeds 7.5% of your adjusted gross income. However, this number may change from one tax year to the next, as it used to be 10% in 2019. For the tax year 2022, the limit is still 7.5%.
Here’s an example of how this works: Let’s say that you incur $10,000 in qualified medical expenses throughout the year and that your AGI is $100,000. The way you calculate your AGI limit is by multiplying your AGI by 0.075. In this case, that amounts to $7,500. Next, you subtract the qualified medical expenses by this number ($10,000 minus $7,500), and you will get to the amount you can deduct. In this particular case, you would be able to deduct $2,500 in qualified medical expenses.
It is also worth noting that your therapy might not be the only qualified medical expense for the year. This limitation includes any and all medical expenses that you plan to deduct, including therapy, medical devices, necessary services, etc.
Who can claim these deductions?
Aside from personally claiming your own therapy deductions, you can also deduct any qualified medical expenses that your spouse or your dependents incur. Of course, you need to be the one who paid for them in the first place.
There are numerous rules regarding claimant privileges, but here are the most important ones:
- Your dependents do not necessarily have to live with you
- You can claim a deduction even if you don’t have custody and your former spouse claims them as dependents on their tax return
- It is possible to claim tax deductions for someone who does not qualify for dependency under the IRS rules (high gross income, filing a separate tax return, etc.)
Basically, if you have paid for the therapy for someone that would be your dependent under “normal” circumstances, you will be able to claim a therapy tax deduction. Of course, all the other rules and limitations still apply according to your AGI.
As you might have seen, the question of whether therapy is tax deductible or not is quite difficult to answer. For the most part, you can follow a simple logic: If the therapy is necessary for you to function normally, it will be tax deductible. Whether it is smart to itemize for a therapy tax deduction or simply take the standard deduction that’s a whole different story.
For more information on online therapy, taxes, and how they intertwine, refer to the rest of the Consumer Opinion Guide. We can help you find both the best therapy program and the best tax relief company!