Is Therapy Tax Deductible?

Yes, therapy may sometimes be tax-deductible if it qualifies as a medical expense. The IRS also determines eligibility based on how much of your income you spend on total medical costs, not on therapy alone. 

Understanding the rules for medical expense deductions and how you might be able to claim therapy costs on your tax return may help you choose your next step with confidence. 

Is therapy tax deductible on your taxes?

You might be able to deduct your therapy costs on your tax return if you meet a few IRS requirements. 

The IRS generally considers therapy a qualified medical expense if it's provided as treatment for a mental health condition. For example, someone receiving therapy for anxiety or depression may be able to deduct medical expenses related to their treatment. However, a person who attends couples or marital counseling with their spouse typically would not be eligible unless the therapy qualifies as treatment for a diagnosed medical condition. 

Therapy also only qualifies for tax deductions if you receive care from a licensed provider, such as a psychologist, psychiatrist, licensed professional counselor, or other licensed mental health professional. Meanwhile, sessions with a career coach wouldn't count as tax-deductible, because they're not a licensed health professional. 

Your income matters, too. The IRS only allows taxpayers to deduct medical expenses that exceed 7.5% of their adjusted gross income (AGI). While therapy alone usually doesn't cost that much, this rule may apply if you have other qualifying medical costs in the same tax year. 

What counts as a deductible medical expense?

Many costs related to mental health care may qualify as deductible expenses, including: 

• Therapy sessions with a licensed provider
• Some mental health-related travel, such as bus fare or the cost of gas to travel to in-person therapy appointments
• Certain professional fees, such as the cost of an evaluation for autism spectrum disorder
• Prescription medication costs 

However, mental health costs that have already been reimbursed by medical insurance don't qualify as tax-deductible. You also can't deduct expenses that have already been covered by something else, such as a flexible spending account (FSA). 

How much of your medical expenses can you deduct?

If you have qualifying expenses, use this simple formula to calculate your potential deduction:

Medical deduction = Total medical expenses - (AGI x 0.075)

Suppose that Courtney's AGI is $50,000 for this tax year. She spends $2,000 on online therapy with a licensed counselor as treatment for depression. She also has $7,500 in out-of-pocket costs for knee surgery, bringing her total qualifying medical expenses to $9,500. The IRS allows her to deduct the portion of those expenses that exceeds 7.5% of her AGI, or anything over $3,750. 

Here's a more complicated scenario: Matt's AGI is also $50,000 for the tax year. He pays $4,000 for therapy with a licensed psychologist at a private practice, but his health insurance covers $1,500 of it. He also spends $2,000 out-of-pocket for an Attention-Deficit/Hyperactivity Disorder assessment. After he gets diagnosed, he uses his HSA to pay for an additional $500 in copays for a prescription medication. 

Matt's expenses add up to $6,500, but $1,500 is covered by insurance, and $500 comes out of his HSA. That leaves him with $4,500 in qualifying expenses. Once he subtracts the 7.5% AGI threshold ($3,750), he may be able to deduct $750 for his medical expenses. 

Of course, you shouldn't rely on napkin math for your actual tax return. A tax professional may be able to help you figure out how much you may potentially deduct.

How do you claim therapy costs on your tax return?

The IRS allows you to claim itemized deductions for eligible medical expenses on Schedule A (Form 1040). 

You'll need to add up all of your qualifying medical expenses and enter the amount on Schedule A. You'll also enter your AGI and multiply it by 7.5%, then subtract that amount from your medical costs. 

If you choose to claim medical expenses on your tax return, you can't take the standard deduction that year. Depending on your income and other itemized deductions, you may have a lower tax burden if you claim the standard deduction instead. Be sure to run the numbers for both options to see how they affect your tax bill. 

Of course, you shouldn't wait until tax season to start tracking your medical expenses. Create a digital or online folder to store receipts, invoices, statements, and other documentation. These records should include your therapy costs and provider information. 

Online therapy platforms with subscription models may make it easier to track your therapy expenses for tax purposes. For example, a BetterHelp subscription costs around $70 to $100 per week. You may choose to get billed weekly or every four weeks.

Pricing is based on factors such as your location, referral source, preferences, therapist availability and any applicable discounts or promotions that might apply

BetterHelp also accepts major insurance plans for online therapy. While you can't deduct the amount insurance covers from your taxable income, it may reduce what you pay out of pocket. Insurance availability and coverage may vary by state, plan, provider network, therapist availability, and deductible status. 

Can you use an HSA or FSA to help pay for therapy?

Yes, health savings accounts (HSAs) and FSAs typically allow you to use your funds to pay for therapy with licensed providers if it counts as a qualified medical expense.

Tax advantages are one of the biggest perks of using an HSA or FSA. You may contribute pre-tax money into your account, then withdraw it to pay for eligible medical expenses without paying taxes on the funds you spend. This approach may help you reduce out-of-pocket costs without the hassle of itemizing deductions. 

Eligibility may vary, though. Always verify what your HSA covers with your plan administrator before you book a therapy session. 

If you're researching therapy practices, look for ones that accept HSAs and FSAs. Before booking, you should also ask whether mental health treatment is covered, whether a copay or deductible applies, and how many sessions per year your plan allows.

Find support that fits your budget and needs 

Is therapy tax deductible? Yes, but you'll need to meet IRS requirements and keep a tidy paper trail. Understanding your tax situation is one piece of the puzzle; the more important step is finding the right support for your mental health when you need it.