The life of a Nurse Practitioner is never boring. Whether you’re helping a patient with the small injury or working with a child with a complex medical diagnosis, you seems to be running from one patient to another!
You spend thousands of dollars each year to keep your private practice running.
Have you ever thought about which of these expenses are tax-deductible?
In this article we’ll be discussing “Tax Deductions for Nurse Practitioners in 2022 – 2023” as well as many tax tips that can help you lower your tax bill.
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What Are Best Tax Deductions for Nurse Practitioners?
As a Self Employed Nurse practitioner, you can not only deduct normal tax deductions such as Standard Deduction, Union Dues, Chartable giving and student loan interest, you can write off many of your business related expenses on your tax return.
Do you know what are Best Tax Deductions for Nurses? Lets review top Tax Deductions that Nurse Practitioners can use in 2021 and 2022 to help lower your taxes.
These work related tax deductions and strategies can dramatic effect your tax bill so read ahead before they change next year’s return too!” also see our bonus Tax Tips at the end.
Advertising & Marketing for Nurse Practitioners
As most of the Nurse Practitioners get their business from online these days, you can deduct your expenses such as Website, Business Cards, Website Hosting cost, domain cost and so on.
You probably also spend money on Yelp, Google AdWords, Facebook and other online advertising platforms. All these expenses are tax deductions for federal and state tax purposes.
If you still do mailing campaigns such as postcards and ads in magazines, you can deduct those expenses as well.
Education And Training for Nurse Practitioners
One of the things we have learned by talking to hundreds of successful Nurse Practitioners that they always invest money in their earning ability.
Many work with other successful Nurse Practitioners to learn and upgrade their work related skills. Many Doctors also spend money on continuing education requirements to stay on top of legal and business requirements.
Many successful Nurse Practitioners also buy work related Audio book subscription from Amazon or real estate books, and online courses. These expenses not only reduce your taxable income but also can help you increase your earned income as well.
Pro Tip: If you travel for continuing education, your travel expenses are fully tax deductible.
Required Licenses And Dues For Nurse Practitioners
In order to work as a Nurse Practitioners you are required to maintain your license and in pay for dues either on year or quarterly basis.
This may include but are not limited to City License, County License and State Licenses. All these expenses can be legal tax write off.
Phone, Internet & Fax
Nurse Practitioners spend a large amount of the time over Phone, Internet either answering prospective customers phone or doing marketing.
As a Nurse Practitioners you can write off Large portion of your Cellphone (Verizon or AT&T), Internet, and Fax/E Fax Charges.
Insurance for Nurse Practitioners
Nurse Practitioners are required to carry various insurance to protect the public. These insurance include Medical Malpractice Insurance, General Business Coverage Insurance and Business Vehicle Insurance.
If you are successful enough to have your own office, you may have employees and will need to pay Workers Compensation. This is also tax deductible.
Nurse Practitioners Vehicle(Car) Tax Deduction
As a NP you have to travel a lot. Many Nurse Practitioners work for many hospitals and have to travel to see patients there.
As a NP you also travel for your continuing education or to go to library to research complex medical conditions.
Vehicle expense are important deduction and its crucial that you learn all the options before making your choice.
You have two options when claiming Painting Business Owner Vehicle Tax Deduction:
Simple Method (Standard Mileage Deduction)
The simple method where you take a cost per mile for miles you driven for business.
For 2021, the standard mileage rate is 56 Cents per mile.
For Example: if you drove 10,000 miles, you could deduct $5,600 from your
In addition to Standard Mileage expense, you can also get to deduct DMV Registration fees and taxes, car loan interest, Vehicle Cleaning, Bridge Tolls, and parking fees to the standard mileage deduction.
Actual Method
Actual method is typically used by many Nurse Practitioners especially when their actual expenses are significantly more than the standard mileage method.
In actual method, you itemize the list of expenses pertaining to your vehicle. Vehicle Repairs and maintenance, Parking, Vehicle Lease Expense, Vehicle Cleaning, DMV fees and Depreciation.
Tip: We recommend looking into Tax Deductions for Nurses regarding Pickup or Large Vehicle Purchase.
This is especially helpful if you purchase a business vehicle that is equal or greater than 6000 Pounds.
In this case you may be able to depreciate the vehicle 100%(Given its purely used for work and not for personal use)
Business Travel & Meals
If you work across state or across country you may have to travel a lot, Many of the Travel Expenses are fully tax deductible for Travel Nurses.
Most common travel expenses for Travel Nurses and Nurse Practitioners include Airfare, Hotel Stay & Lodging and Travel Meals.
On the other hand if you are not travelling and taking a client out for a business meal and taking another Nurse Practitioners, or vendor out to discuss business you can write off Meals.
Usually meals are 50% deductible but in 2021 and 2022 laws may be slightly different(due to Covid 19) and may allow up to 100% deduction of meals for Travel Nurses.
Home Office Deduction for Nurse Practitioners
Many Nurses, Physicians and medical practice owners work from their home. After Covid 19, Many provide Tele Health Services from their home. They usually have their computer, printer and other equipment setup at home.
IRS requires that portion of the home deducted on your tax return is exclusive area and is not share for personal purposes.
For example you cannot have a small table on side of bedroom. There are two methods for deducting your home office. Simple & Complex Method.
Simplified Method
Simple method allows you to take your square footage and multiply by 5 dollars a square foot. Max amount you can write of under this methods is $1500.
An example would be a 100 square foot room that you use exclusively as your office. Multiplying that by $5 gives you $500 that you can deduct for your home office.
Detailed Method
In order to calculate home office deduction under this method
first you find out what is total size of your home office, example 200 Square foot then you divide that by total home size, example 2000 Sq Feet. So Office is 10% of the total home.
Secondly, you take home expenses such as Mortgage interest, Insurance, Property Tax, Repairs and Utilities and come up with the total example $20,000
Thirdly, you take 10% of $20,000 which will be $2000
Nurse Practitioners Practice Rent And Utilities
If you rent a space for your photography business, then the rent you pay is tax-deductible along with Office utilities such as electricity, water & trash service.
This is an important Tax Deductions for Nurses for 2021-2022 as many Nurse Practitioner need to store their equipment either at their shop or at rented storage or warehouse space.
Business Gifts ($25 Deduction Limit)
IRS allows Business Gifts of $25 Per person Per year. If you pay anyone more than that then it may be taxable depending up the purpose and what was the Gift intended to accomplish.
If a payment can be considered other income or referral and you pay someone $600 or more then you are required to issue them a 1099M or 1099 NEC.
Self-Employed Health Insurance Deduction for Nurse Practitioners
If you are self employed, most likely you have to buy your own health insurance. You can deduct health insurance you pay for yourself or your family.
This is written off as a Adjustment in your income taxes.
Nurse Practitioner Tools, Equipment and Office Furniture
Nurse Practitioner business owners often purchase standard business equipment like computers, camera, stands, backdrops, iPad for invoicing.
Most of these items are fully deductible(expensed) in the year you purchase them versus having to depreciate them over multiple years.
However, if you find yourself buying expensive items such as Laptops, X Ray Machines, or furniture for patients, that cost over $2500, be sure to check with your Tax Accountant & CPA if it can be deducted or depreciated over time.
You may be able to take Section 179 or Bonus Depreciation on some of the items.
Office Supplies & Software
Nurse Practitioner regularly use office supplies such as Envelopes, Folder, Paper and Pens when writing Commercial Architectural proposals or reports, visiting homes to customers and mailing or sending paperwork.
If you use any software to contact potential customers, keep track of your offers, Contact current customers or keep track of your finances using software such as QuickBooks you can deduct the cost of these softwares.
- CRM( Example Sales Force)
- Quickbooks
- Marketing System like Mail Chimp
- Medical Transcription or Billing Software
Here is list of Best Accounting Software for small businesses to keep track of their income and expenses.
Employee Payroll & Payroll Taxes
If you have employees that work for you such as receptionist, admin, bookkeeper or sales support, you pay them on hourly or salary basis.
You can deduct their W2 Salary and any employer payroll taxes(Such as FICA, State Unemployment Taxes) that you pay in addition to the payroll.
You can hire a payroll company such as ADP, Paycheck or work with your Tax Professional as many of them offer Payroll Services for their clients. Most nurses prefer to work with their Tax Professional as they have all the services under one roof and they can adjust their payroll as needed based on their income and deductions.
Nurse Practitioners Retirement Plan Contribution
One of the best tax deductions for Nurses is a well structured Retirement Plan. It is important to start putting away money for retirement. You can not only have money available when you are older but you can save a thousands of dollars if you
There are a several good plans to choose from; We have provided top 3:
SEP IRA
2022 limit is the lesser of $61,000 or 25% of income. As self-employed, this plan allows Nurse Practitioner to invest significantly more money each year into retirement versus the traditional IRA plan.
Keep in mind that if you do have employees other than yourself or your spouse, you’ll need to match whatever contribution percentage that you elect for yourself, for your eligible employees as well.
IRAs(Traditional & Roth)
2022 limit for Traditional IRA is $6000 and $7000 if you are over 50 years old. If you don’t want to put a large amount of money away, then a Traditional(Pre Tax) or Roth IRA(Post Tax) might be for you.
Solo 401k
2022 individual contribution limit is $22,000, $27,000 if over 50. However, like a corporate 401k, your company can also contribute to this plan – as much as 25% of your compensation.
The max individual plus business contribution to this plan can be as high as $58,000 or $64,500 if over 50, for 2022.
Key requirement is you need be self-employed with no employees in your business( Basically you and your spouse only) It is ok to have independent contractors as long as they are properly classified.
Defined Benefit Plan ( Pension Plans)
A defined benefit plan is a retirement plan in which an employer agrees to provide a certain level of benefits to employees upon retirement. The benefits are typically based on the employee’s length of service and salary.
Pension plans are the most common type of defined benefit plan. Other types of defined benefit plans include cash balance plans and hybrid pension plans. These plans can allow you to put away a very large amount of money in your retirement, helping you lower your taxes dramatically. If you are over 50 years of age, this plan contributions can be over $100k (please check with your CFP)
Pension plans are regulated by the Employee Retirement Income Security Act of 1974 (ERISA). Cash balance plans are not subject to ERISA regulation. Hybrid pension plans are a combination of a pension plan and a cash balance plan and are subject to ERISA regulation.
Defined benefit plans are an important part of many employees’ retirement planning.
Employees who participate in these types of plans can be assured of a certain level of income during retirement, which can help to ensure a comfortable retirement lifestyle.
Legal Or Professional Services
If you pay an Attorney, CPA or a bookkeeper for your photography business, you can deduct these professional fees.
Don’t forget to issue 1099M or 1099 NEC as needed. See our guidelines for 1099s.
Set up a S Corporation for Nurse Practitioner
Nurse Practitioner can save thousands by incorporating their business as a Professional S-Corp by filing election(Form 2553), Nurse Practitioner can save thousands or even tens of thousands of dollars on self-employment tax versus being a sole proprietor.
The IRS typically charges self-employed business owners 15.3% for self-employment (12.4% for social security and 2.9% for Medicare).
If you are a Sole Proprietor
If you haven’t set your company up as an S-Corp, you will pay this 15.3%, in addition to your income tax, for all of your adjusted gross income.
For example, if you earned $100,000 in after deductions, adjusted gross income, your SE tax alone would be $15,300 (not including what you’d pay for income tax).
Your Business Setup as an S-Corp
If you set yourself up as an S-Corp, you will pay yourself a reasonable salary and also receive distributions(K1) Based on number of hours work if a Nurse Practitioner salary is around $40,000 annually then the Shareholder will take 40k in w2 and 60k in K1
Going back to our example of $100,000 adjusted gross income, let’s assume you paid yourself a salary of $40,000 and took $60,000 in dividends.
In this case, you’d only pay the 15.3% SE tax on the $40,000.
In this example, your self-employment tax is $6,120, effectively lowering your tax burden by nearly $9,000.
Merchant Credit Card Commissions
If you are a Physician that accepts credit cards from your customers, then you may be aware that credit card companies charge you a commissions.
For example visa and master card may charge from 1.5 to 2.5% commissions and American Express may charge from 2.5 to 3.5 per cent commissions.
You are allowed to deduct this commissions from your income as an expense.
You can typically get a printout from their online portal of how much commissions you paid during the year or you can download their monthly statement and total the amount and provide to your tax preparer or accountant.
Bonus Tip
1099 NEC Forms are Due January 31st
If you paid contractors such as Other Physicians, Nurse Practitioners, Medical Assistants, Nurses, don’t forget to issue them a 1099 NEC form by no later than January 31st each year to not receive a penalty. We recommend working with a Tax Professional who can keep you compliant with government filings and tax payments on quarterly and yearly basis.
Furthermore, when you are ready to file your tax return, we also recommend hiring a qualified tax professional such as a CPA or Enrolled Agent who is familiar with business related tax deductions for Nurses.
See IRS page here for more info about 1099 Forms.
Do you want to learn more Tax Tips regarding filing and saving taxes. See our Learn More Section Below.
Final Thoughts
Finally, Tax Deductions for Nurses: Ultimate Guide provides comprehensive list of expenses for Nurse Practitioner
These deductions can help you lower your taxes. These will only benefit you if you track them and keep supporting documents.
Use this Ultimate guide as a reference and discuss these with your Tax Professional or CPA and see how they apply to your tax situation.
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