If you’re a therapist, counselor, or psychologist operating in North Carolina, your tax situation is likely more complex than most individuals—especially if you run your own practice or contract with multiple providers. Whether you’re in private practice in Asheville, group therapy in Charlotte, or telehealth across the state, the right tax strategy can protect your income and reduce stress.

Polaris Tax & Accounting works with mental health professionals across NC to clean up books, file properly, and plan ahead. Below are key tax strategies every therapist should know in 2025.

1. Set Up the Right Business Structure

If you’re still operating as a sole proprietor, you may be paying more than necessary in self-employment taxes.

Options to consider:

  • Single-Member LLC: Adds legal protection with no change in tax structure.
  • S Corporation: Potential to save thousands by splitting salary and profit.

Just make sure you’re paying yourself a “reasonable salary” and maintaining clean books (see below).

2. Deduct Common (and Often Missed) Expenses

Many mental health professionals underclaim deductions or forget to track legitimate write-offs like:

  • Continuing education & licensure renewal
  • HIPAA-compliant software & EHR subscriptions
  • Liability & malpractice insurance
  • Professional supervision costs
  • Rent, utilities, and home office (if applicable)
  • Mileage to off-site sessions or conferences

Pro Tip: Keep digital records and receipts. If you’re ever audited, the IRS expects documentation.

3. Implement an Accountable Plan (If You’re an S Corp)

If you operate as an S Corporation, paying out-of-pocket for business expenses (like CEUs or software) without reimbursement could cost you.

Solution: Use an accountable plan to reimburse yourself tax-free and deduct the cost through the business.

4. Contribute to Retirement and Lower Your Tax Bill

You help clients plan for their future—make sure you do the same.

Great options for solo or small group practices:

  • Solo 401(k) or SEP IRA (for high contribution limits)
  • Roth IRA (if under income thresholds)

Smart retirement planning often defers $6,000 to $66,000+ per year.

5. Stay Ahead of NC-Specific Tax Changes

North Carolina is lowering its individual income tax rate:

  • 2024: 4.5%
  • 2025: 4.25%
  • 2026 (planned): 3.99%

That means long-term planning is more valuable than ever.
📘 Read our full breakdown of NC tax changes

6. Bookkeeping Matters More Than You Think

Therapists often track income via bank deposits or spreadsheets. That’s a problem if:

  • You need to apply for business financing
  • You’re selected for audit
  • You’re making an S Corp election (which requires real books)

We recommend cloud-based bookkeeping software synced with your bank account—and reviewed by a tax pro.

📌 Explore our bookkeeping services

7. Common Mistakes to Avoid

  • Mixing personal and business accounts
  • Not making quarterly estimated tax payments
  • Not tracking mileage for off-site visits
  • Missing out on S Corp savings due to late setup

Build a Practice That Protects Your Peace of Mind

You help others find clarity and peace—we help you do the same with your finances.

With the right entity structure, clean books, and proactive tax planning, North Carolina therapists can lower their tax liability without sacrificing compliance.

📅 Schedule a confidential consultation today

Let’s make 2025 your most financially organized and stress-free year yet.