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What Do Therapists Need to Know About Taxes in Vermont?

Vermont’s state tax system is layered — progressive income tax, a corporate minimum tax, and strict requirements for entity setup. Therapists in private practice need to stay on top of both state filings and federal requirements. This guide breaks down everything you need to know to handle taxes as a Vermont-based clinician in 2025.


Who this guide is for

This guide is designed for:

  • Licensed Vermont therapists (LCMHCs, LCSWs, LMFTs, psychologists, etc.)
  • Solo or group practice owners
  • Clinicians working under 1099 or self-employed income
  • Telehealth or in-person providers

Step 1: Pick the right structure for your practice

How you structure your business affects taxes, liability, and compliance.

Sole Proprietorship

  • No formal setup unless using a business name
  • Income taxed on your personal return
  • No legal separation between you and the business
  • Must register a trade name (DBA) with the Vermont Secretary of State

PLLC (Professional LLC)

  • Vermont allows licensed professionals to form PLLCs
  • Offers liability protection
  • Default taxation is pass-through
  • Can elect S Corp status later
  • Register with the Secretary of State and comply with licensing board guidelines

S Corporation

  • Reduces federal self-employment tax by allowing you to pay yourself a salary + distributions
  • Makes sense once you’re netting ~$75K+
  • Requires payroll, separate tax filings, and solid bookkeeping
  • Vermont also taxes S Corps — more on that below

Professional Corporation (PC)

  • Permitted in Vermont for licensed professions
  • More formal structure, often used by larger practices
  • Can elect S Corp taxation
  • Subject to corporate minimum tax in Vermont

Step 2: Know your state tax obligations

State income tax

    • Vermont has graduated income tax brackets topping out at 8.75% (2025)
    • Pass-through income from PLLCs and S Corps taxed at the individual level
  • File using Form IN-111

Corporate income tax (S Corps and PCs)

    • Vermont taxes S Corps at the entity level
    • $250 minimum business tax applies, even if you don’t owe corporate income tax
  • File Form BI-471 (Business Income Tax Return)

Annual report

    • Required for all entities (PLLCs, PCs, S Corps)
  • Due within 2.5 months of fiscal year end
  • $35 filing fee
  • File through Vermont’s online business portal

Step 3: Pay taxes throughout the year — not just in April

Estimated taxes

  • Required if you’ll owe $500+ to Vermont or $1,000+ to the IRS
  • Due quarterly: April 15, June 15, Sept 15, Jan 15
  • Use Form IN-114 for state estimates or pay through the myVTax portal

Self-employment tax

  • 15.3% on net income for sole props and default PLLCs
  • Can be reduced with S Corp structure + payroll

Filing requirements

  • Sole prop: Schedule C + VT Form IN-111
  • PLLC: IN-111 + annual report + estimated payments
  • S Corp: Federal 1120-S + VT BI-471 + shareholder K-1s + annual report

Step 4: Track and claim your deductions

The better your records, the lower your taxable income — especially with Vermont’s high rates.

Deductible expenses for therapists

  • Practice software (EHR, scheduling, telehealth)
  • Rent or eligible home office
  • CEUs, supervision, licensing
  • Liability insurance
  • Internet, phone, office supplies
  • Professional memberships and directories
  • Health insurance (if self-employed)
  • Retirement contributions (Solo 401k, SEP IRA)

Step 5: When it’s time to consider an S Corp

S Corps can be powerful in high-tax states like Vermont — but you’ll still owe that $250 minimum tax.

  • Run compliant payroll and issue W-2
  • Take remaining income as distributions
  • Track both entity-level and personal income tax obligations
  • Worth it when net income exceeds ~$75K

Step 6: Common mistakes therapists make

  • Forgetting to file the annual report
  • Underestimating Vermont’s minimum business tax
  • Not registering a trade name when required
  • Delaying S Corp election beyond the ideal income level
  • Mixing business and personal funds
  • Missing out on CEU, home office, or supervision deductions

Step 7: Our recommendations by income level

Net Income Range

Suggested Action

Under $50K

Sole prop or PLLC; keep expenses tracked; watch for VT estimated tax threshold

$50K–$100K

Consider S Corp; file BI-471; run payroll; get help with compliance

Over $100K

S Corp with full tax planning; maximize deductions; stay ahead of reporting deadlines

Need help figuring this out?

We help Vermont therapists manage high state tax rates, structure their entities properly, and stay compliant with state filing requirements — so you can focus on your clients, not the IRS.

Book a consult or email us at david@leichtercpa.com

Disclaimer: This guide is for informational purposes only and does not constitute legal, tax, or financial advice. While we make every effort to keep the content accurate and up to date, state laws and regulations can change without notice. You should consult a licensed professional in your state before making any decisions based on this information. Leichter Accounting Services is not liable for any errors or omissions, or for any actions taken based on the contents of this guide.