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Level 2

Question

deductions

Forum|Forum|5 years ago
March 31, 2021
1 reply
2 views

I am a sole proprietor as a psychotherapist in CA. I take insurance, but the insurance's contracted rate/their fee schedule is less than my going rate for sessions. Can I write-off/deduct the difference between the contracted rate and my going rate on my business taxes for federal and state?

Thank you!

Level 13

No, you cannot claim an expense ("deduction") for amounts you did not receive.

The only way you can claim an expense or a deduction is when you pay for the item in question with after-tax dollars.

When you accept less than your normal billing rate for a service, you are simply offering a discount. Discounts are not "deductible" - you never receive them and do not report them as income.

See Are free services or discounts given to clients tax deductible? for additional discussion on this issue.

av71Author

Level 2

Okay thank you!