deductions

[av71]

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!

[ToddL99]

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.

[av71]

Okay thank you!

[av71]

Is there another place on my taxes I can apply this? Like another place to add it to adjustment my taxable income amount or is there no such thing as a "contractual write-off"?

[DianeW777]

No.  This is a bookkeeping adjustment but is not a tax return allowed deduction.  Think of it like this, the income was never reported or taxed, and in tax law, aside from the current stimulus situation. this is not allowed unless you were on the accrual basis which means the income is reported when it is billed not when it is received.

• Example: A farmer is allowed to deduct the seed, fertilizer, equipment, labor, etc to plan his crop.  If it is destroyed by fire, or weather, and they do not have any sales they cannot deduct what they anticipated they might receive.