Therapists in private practice: the money side, and how BrassWell handles it

Most therapists open a private practice because they want control of their caseload, not because they want to run a business. Then the first insurance payment arrives six weeks late, a client pays by card through a processor you have never thought about, and somebody mentions quarterly estimated taxes for the first time in April.

None of it is hard. It is just a second job nobody trained you for. This guide covers the money side of a solo or small private practice in 2026 — the forms that arrive, the tax nobody withholds, what you can deduct, and how to keep client information out of your books — and then shows exactly how BrassWell handles the parts it handles, and where it stops.

Which tax forms a therapist actually gets

A therapist in private practice can receive three different information returns in the same year, and it is easy to mistake one for the whole picture.

• Form 1099-MISC, box 6, from insurers. Box 6 is “medical and health care payments”, and the IRS instructions say it includes payments made by health insurers. For payments made in 2026 the reporting threshold is $2,000 per payer, up from $600, and it is indexed for inflation from 2027.
• Form 1099-NEC, from a business that hires you. A group practice that pays you as a contractor, an employee assistance program, a school or a company buying workshops. The threshold is also $2,000 for 2026.
• Form 1099-K, from a card processor or payment app. If clients pay by card through your processor, it reports every dollar, with no threshold. A payment app or marketplace reports once you pass $20,000 and 200 transactions in the year.

The rule underneath all three is the one that matters: you owe tax on every dollar of practice income, whether or not a form reports it. An insurer that paid you $1,900 sends nothing. A client who pays by check never appears on any form. Your own records are the only complete list, which is why the records have to be yours rather than reconstructed from paperwork in February.

The 15.3% nobody withholds

As an employee, a clinic withholds income tax and pays half your Social Security and Medicare. In private practice you pay both halves yourself: 15.3% self-employment tax on 92.35% of your net profit, before income tax starts. Nothing is taken out of an insurance payment or a client’s card charge, so the whole deposit looks like yours.

It isn’t. The practical rule most solo practitioners land on is to set aside 25–30% of profit as it arrives and pay it in four quarterly installments. For 2026 the last one is due January 15, 2027. The full method, worked from your own numbers, is in how much to set aside for taxes, and the dates and penalty rules are in quarterly estimated taxes.

The 20% deduction, and why “health” matters

The qualified business income deduction lets many self-employed people deduct up to 20% of their business profit. Health is one of the “specified service” fields where the deduction phases out at higher incomes, and the regulations name psychologists and “other similar healthcare professionals” — generally read to include licensed therapists and counselors.

For most solo practices this sounds worse than it is. The phase-out only starts above $201,750 of taxable income for a single filer in 2026, or $403,500 filing jointly. Below that line, a therapist takes the deduction like anyone else. Above it, the rules get complicated enough that a tax professional earns their fee.

What a therapist can deduct

The test is the ordinary one: ordinary and necessary for your practice. For therapists that usually means:

• License renewals, board fees and professional memberships.
• Continuing education that maintains or improves the skills of the work you already do. Education that qualifies you for a new profession — the degree that got you licensed — is not deductible. Pre-licensure supervision sits close to that line; ask a tax professional about your own situation.
• Professional liability insurance.
• Practice software: your EHR, telehealth platform, scheduling and the share of your phone and internet used for the practice.
• Office rent, or a home office used regularly and exclusively for the practice. The simplified method is $5 per square foot up to 300 square feet, so at most $1,500.
• Assessment materials, books and office furnishings used in session.
• Card processing and bank fees on client payments.

What usually does not qualify: your commute to a rented office, your own therapy unless a tax professional tells you otherwise for your facts, and the personal share of anything you use both ways. The full list, with what people wrongly assume, is in what you can actually deduct.

Keep clinical details out of your books

This is the section most bookkeeping advice for therapists skips, and it is the one that matters most to your profession. Your financial records do not need to know anything clinical, so they should not contain anything clinical.

• Diagnoses, treatment notes, session content and insurance claims belong in your EHR — the system built and contracted to hold health information.
• In your bookkeeping, use a client code or initials rather than full names wherever you can. “Client 014, March sessions” is a perfectly good income entry.
• Superbills come from your EHR, because they carry diagnosis and procedure codes. Your bookkeeping only needs to know that money arrived.

BrassWell is a finance app, not an EHR or a practice-management system. It is not built to hold health information, and BrassWell does not sign business associate agreements (BAAs), so keep protected health information out of it. Used the way this section describes, it never has to hold any.

Insurance, self-pay and the timing problem

A practice with insurance clients lives with a lag. Sessions happen in March, the claim goes in, and the payment lands in April or May, often in one batch covering several clients. On the cash method — which almost every solo practice uses — that money is income the day it is received, not the month the sessions happened.

Two things follow. First, a lumpy month is normal and is not a sign that you are suddenly earning more. Set aside tax on the deposit anyway, because the quarter it lands in is the quarter it is taxed. Second, your self-pay clients are the predictable part of the income, which makes them the part to invoice cleanly and on a schedule.

One rule specific to health care: under the No Surprises Act, clients who are uninsured or paying out of pocket are entitled to a good faith estimate of expected charges. Most EHRs produce one, and CMS publishes the requirements and a template.

How a therapist uses BrassWell, step by step

Here is the setup we would suggest for a solo practice. It takes about twenty minutes, and none of it touches clinical information.

1. Set your tax set-aside rate. Start at 25–30%. Every payment you log then shows how much of it belongs to the IRS before you can spend it, and the Taxes screen keeps a running estimate and a suggested quarterly payment. It is an estimate to help you plan, not tax advice, and BrassWell does not file anything.
2. Add clients by code. Use initials or a number, as above. The name on an invoice can be whatever your client agreed to receive.
3. Invoice self-pay clients. Add your own payment link — the processor you already use — and it appears on every invoice as a “Pay this invoice” button. Money never passes through BrassWell. Mark an invoice paid and it becomes income without typing it twice.
4. Log insurance deposits as income when they land, one entry per deposit, with the payer as the source. That is exactly what your 1099-MISC forms will be checked against.
5. Photograph receipts for CE courses, books, license renewals and supplies. AI reads the vendor, date and amount and files it to a tax category; it asks before the first photo is processed, and you can switch it off and type expenses instead.
6. Export for your CPA. One spreadsheet with a tab for income, expenses, invoices and clients, plus receipt photos as a zip. The export works even if you stop paying for BrassWell.

Which plan. Core includes five invoices a month. If you invoice each private-pay client separately, most practices pass five in the first week, so Pro, with unlimited invoices, is the realistic plan for a therapist who invoices in BrassWell. If your EHR already handles client billing and you only want the tax set-aside, expenses and exports, Core is enough. Current prices are on the pricing page, and every account starts with 14 days of Core free, with no card.

Where BrassWell stops

Being plain about this saves you a wasted trial:

• No insurance claims, eligibility checks or superbills. That is your EHR or a billing service.
• No scheduling, notes or client portal.
• No payroll. A group practice with W-2 employees needs a payroll provider and probably full accounting software.
• No double-entry ledger. If your accountant wants a general ledger, they can build one from the export, but BrassWell is not that tool.

Where it fits is the gap between your EHR and your tax return: knowing, on any given day, what you earned, what you spent and how much of the balance is not yours.

A ten-minute weekly routine

Pick the same slot every week — Friday after your last session works for a lot of clinicians.

1. Log any insurance deposits and mark paid invoices.
2. Photograph the week’s receipts.
3. Move the week’s tax set-aside into a separate savings account.
4. Glance at unpaid invoices older than 30 days and send one reminder. Our guide to getting paid faster has wording that stays kind and still works.

Ten minutes a week is what turns April from a reconstruction into a review.

Questions, answered

Do therapists get a 1099 from insurance companies?

Usually, if the insurer paid you enough. Health insurers report payments to providers on Form 1099-MISC in box 6, medical and health care payments. For payments made in 2026 the threshold is $2,000 per payer, up from $600, and it is indexed for inflation from 2027. You owe tax on the income whether or not a form arrives.

How much should a therapist in private practice set aside for taxes?

A common starting point is 25 to 30 percent of profit. Self-employment tax alone is 15.3 percent on 92.35 percent of net profit, and income tax comes on top. Adjust once you know your own bracket, and pay it in four quarterly installments.

Can therapists take the 20% QBI deduction?

Usually yes. Health is a specified service field, so the deduction phases out at higher incomes, but the phase-out only begins above $201,750 of taxable income for a single filer in 2026, or $403,500 filing jointly. Below that, a therapist takes the deduction like any other self-employed person.

Is continuing education deductible for therapists?

Continuing education that maintains or improves the skills of the work you already do is generally deductible. Education that qualifies you for a new profession, such as the degree that led to your license, is not. Pre-licensure supervision is close to that line, so check your own facts with a tax professional.

Should client names go in my bookkeeping software?

As little as possible. Keep diagnoses, notes and insurance claims in your EHR, and use a client code or initials in your financial records. Your bookkeeping only needs to know that money arrived and from whom, in a form your client would be comfortable seeing on an invoice.

Is BrassWell an EHR or practice-management system?

No. BrassWell tracks income, expenses, invoices and your tax set-aside. It does not handle insurance claims, superbills, scheduling or clinical notes, and it is not built to hold health information. BrassWell does not sign business associate agreements (BAAs), so protected health information should stay out of it.

Sources

1. Instructions for Forms 1099-MISC and 1099-NEC — IRS. Box 6 covers medical and health care payments, including payments by health insurers; the $2,000 threshold for tax years beginning after 2025, indexed from 2027.
2. Understanding your Form 1099-K — IRS. No threshold for direct card payments; $20,000 and 200 transactions for payment apps and marketplaces.
3. Self-employment tax (Social Security and Medicare taxes) — IRS. The 15.3% rate and the 92.35% of net earnings it applies to.
4. Revenue Procedure 2025-32 — IRS. The 2026 qualified business income threshold amounts: $201,750, and $403,500 filing jointly.
5. 26 CFR § 1.199A-5, Specified service trades or businesses — Legal Information Institute. The field of health, naming psychologists and other similar healthcare professionals.
6. Simplified option for home office deduction — IRS. $5 per square foot, up to 300 square feet, for a space used regularly and exclusively for business.
7. No Surprises Act — CMS. The good faith estimate owed to uninsured and self-pay patients, with the rules and a model template.