Business taxes


What Are Tax Brackets For Therapists?

9 Minutes Read

Understanding the Salary of Therapists: Insights for Mental Health Counselors and Tax Brackets



In a time where the demand for mental health professionals far outstrips supply, understanding how much therapists earn has never been more relevant.  

Are you a current therapist, an aspiring one, or a business looking to understand the financial landscape of mental health services? This article will help you understand the financial realities of therapy to support the society's needs and how earnings stack up amidst a growing crisis.

What is the average annual income for therapists, and what factors influence their earnings?

Understanding Therapist Salaries: A Broad Overview

Discuss the Average Income of a Mental Health Counselor

How much does a therapist make a year? Consider the vast variation within the field. Therapist salaries can significantly vary based on type of practice and specialization:

  • Clinical Psychologists, often with a PsyD or PhD, might see an average annual salary ranging from $70,000 to $100,000, heavily influenced by years of experience and whether they work in various settings or private practice.
  • Counselors and therapists, especially those focusing on substance abuse and behavioral disorders, earn between $45,000 to $65,000.
  • Psychiatric Nurse Practitioners and licensed mental health providers, representing the higher end of the spectrum, often exceed $100,000 due to their specialized medical training and private practice earnings.

These figures are supported by the Bureau of Labor Statistics (BLS), which provides data on the median pay and job growth for therapists. Due to the growing need for mental health services, these fields are expected to grow faster than the national average.

Further reading: Should You File Your Own Taxes as a Therapist?

Impact of Specialization and Location on Therapist Salaries

Specializing in certain areas, such as marriage and family therapy or child psychology, can significantly affect earnings. For instance:

  • Marriage and family therapists often have a master’s degree in counseling and earn a median annual salary that their client base and specialty focus can impact.
  • Social workers and those specializing in mental health issues might see different financial outcomes based on the demand for qualified specialists in their regions and the cost of living.

The geographic impact on how much therapists make is notable. Those practicing in metropolitan areas of the U.S. often command higher incomes due to the higher cost of living and greater demand for mental health services.

Diving Into Tax Brackets: What Therapists Need to Know

Explain Tax Brackets for Mental Health Professionals

Tax brackets indicate ranges of income taxed at specific rates, which escalate as incomes rise. For therapists, understanding how these brackets apply aids in financial planning. Generally, the more you earn, the higher the percentage of tax applied to your top dollars.

Specific Brackets for Therapists and Mental Health Counselors

Tax brackets vary depending on earnings, which are influenced by the level of education, the type of practice you work in, and the state where the therapist operates. Here’s an overview:

  • Lower Income Bracket: Early-career mental health professionals or those in general practice might see salaries around the lower tax bracket, potentially taxed up to 12%.
  • Middle Income Bracket: More experienced licensed professional counselors and school and career counselors, often earning from $40,001 to $85,000, could be taxed at 22% to 24%.
  • Higher Income Bracket: Highly specialized therapists, such as those in top-paying fields of psychology or those who run competitive private practices, might earn in the higher brackets, facing tax rates of 32% or higher.

Key Factors Influencing Therapists’ Tax Brackets

  • Earning Potential: Therapists' average salary and earning potential can also vary by state and specialization. Licensed therapists with additional certifications or those who have developed relationships with clients in niche areas see higher salaries.
  • Adjustments and Legislation: According to the BLS, ongoing tax policy and healthcare legislation adjustments could redefine tax liabilities. Therapists should stay updated on these changes to manage their finances effectively.
  • Deductions and Credits: Qualified therapists might reduce their taxable income through deductions like educational expenses or by investing in office space renovations that better serve potential clients.

Maximizing Earnings and Minimizing Tax Liabilities in Private Practice

Tax Deductions and Credits

In therapy, managing tax obligations effectively includes utilizing various deductions and credits to reduce taxable income significantly. It’s important to consider:

  • Continuing Education: Therapists can deduct expenses for classes or workshops required to get licensed or maintain licensure, which is essential as the job outlook for types of therapists varies, and continuous education can lead to higher salaries.
  • Licensing Fees: These fees are particularly critical as the BLS predicts that the requirement for counselors will continue to increase from 2023 to 2024, reflecting the expected job growth in this profession.
  • Home Office Expenses: Many therapists who choose to pursue a professional practice from home can deduct a portion of their living expenses if their home office is the primary place where they work.

Retirement Savings Plans

Retirement planning is indispensable, especially considering the variable workweek and salary potential of therapists:

  • SEP IRAs and Solo 401(k)s: These plans are vital for therapists, especially those in private practice, as they offer a method to save for retirement while reducing taxable income, accommodating the often-competitive salaries and work environment demands within mental health salaries.

Innovative Financial Strategies for Therapists

Diversifying Income Streams for Higher Salary Potential

Diversifying income is increasingly recognized as a necessary strategy for therapists aiming for even higher financial stability and independence:

  • Online Courses and Webinars: These can tap into the growing need for accessible mental health resources, reflecting the growth rate in digital learning within social work and therapy.
  • Publishing: Writing books or articles can not only supplement income but also bolster professional reputation in a specific area of expertise.
  • Workshops and Speaking Engagements: These provide substantial opportunities to earn and expand professional networks, critical in a profession where relationships with clients and peers are key.

Quarterly Tax Payments

  • Better Cash Flow Management: This method helps therapists manage their earnings more predictably, aligning with the job growth for therapists and the fluctuating nature of income in practices like treatment centers or third-party contracted work.
  • Avoiding Penalties: Regular installments keep therapists compliant with IRS requirements, essential for maintaining financial health and focusing on career options without the burden of unexpected tax bills.

Further reading: 2023 Schedule C IRS Business Activity Code Update and Business Codes List

Key Takeaways

  1. Salaries for Mental Health Professionals: The amount therapists earn can vary widely based on location, experience, and specialization. Mental health counselors earn on average $49,950 per year.
  2. Highest Employment Areas: In regions with the highest employment for therapists, salaries tend to be higher. For example, California offers numerous opportunities with competitive pay.
  3. Top Earners: The highest 10% of therapists can make significantly more, with some clinical psychologists earning upwards of $120,000 annually, especially in private practice settings.
  4. Education Impact: A research degree, such as a Ph.D. or Psy.D., can greatly affect earning potential. Advanced degrees often lead to higher salaries and more opportunities in the field.
  5. Factors Influencing Pay: Therapists' earnings are also affected by additional factors like certifications, years of experience, and the type of therapy they practice in order to help clients effectively.

How can Taxfyle help?

Finding an accountant to manage your bookkeeping and file taxes is a big decision. Luckily, you don't have to handle the search on your own.

At Taxfyle, we connect small businesses with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will manage your bookkeeping and file taxes for you.

Legal Disclaimer

Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free.

We recommend a Pro file your taxes. Click here to file today.Leave your books to professionals. Click to connect with a Pro.Leave your books to professionals. Click to connect with a Pro.Leave your books to professionals. Click to connect with a Pro.
Was this post helpful?
Yes, thanks!
Not really
Thank you for your feedback
Oops! Something went wrong while submitting the form.
Did you know business owners can spend over 100 hours filing taxes?
Is this article answering your questions?
Do you do your own bookkeeping?
Are you filing your own taxes?
How is your work-life balance?
Is your firm falling behind during the busy season?


May 21, 2024


Antonio Del Cueto, CPA

Antonio Del Cueto, CPA


by this author

Share this article