Physical Therapists, CPA & Tax Services

Why Physical Therapists in Dallas Need a CPA who understands their practice

Physical therapy practices face a unique combination of tax and accounting challenges that most general CPAs miss entirely. Between tracking cash-pay versus insurance reimbursements, depreciating specialized rehab equipment, setting the right S-corp salary, and managing multistate telehealth compliance, a PT owner’s finances look nothing like a typical small business. Getting any one of these wrong can cost you thousands in overpaid taxes or trigger costly IRS scrutiny.

At AG Freideman, we work with physical therapists across Dallas, Plano, Frisco, and the broader DFW area who are tired of explaining their business model to a CPA every tax season. Al Freideman is a licensed CPA with over 30 years of experience, and he handles every PT client personally. No hand-offs to junior staff, no guessing about how rehab billing works. Just one-on-one attention from a CPA who already understands the financial side of running a PT practice in Texas.

Cash-Based vs. Insurance Practice Accounting: Why It Changes Everything

The way your PT practice collects revenue directly shapes how your books should be set up, and most CPAs default to one method without asking the right questions. Cash-pay practices and insurance-based practices have fundamentally different revenue recognition timing, and hybrid practices that accept both need a system that tracks each stream separately.

If you run a cash-based physical therapy practice, you likely collect payment at the time of service. This is straightforward from a bookkeeping standpoint, but it creates its own challenges: tracking membership or package plans where patients prepay for multiple visits, handling refunds or unused sessions, and properly recognizing revenue in the correct tax period. The IRS expects you to report income when you have constructive receipt of it, not necessarily when you deliver the service.

Insurance-based PT practices deal with a completely different set of headaches. You bill a CPT code, wait weeks or months for reimbursement, reconcile what the payer actually paid versus what you billed, and write off the contractual adjustment. Your accounts receivable can look dramatically different from your actual cash on hand. Without proper tracking, you may report income you never actually collected, or fail to report income in the correct period.

For hybrid practices collecting both cash and insurance payments, we set up your chart of accounts to separate these revenue streams clearly. This gives you accurate profitability reporting by service type and ensures nothing falls through the cracks at tax time.

How Should Physical Therapists Handle Equipment Depreciation?

PT practices invest heavily in treatment tables, ultrasound machines, electrical stimulation units, exercise equipment, and technology systems. In 2026, you have several depreciation strategies available, and choosing the wrong one can mean paying far more in taxes than necessary.

Under IRS Section 179, you can deduct the full cost of qualifying equipment in the year you place it in service, up to the 2026 limit (projected at approximately $1.25 million based on inflation adjustments). For most PT practices, this means that new AlterG anti-gravity treadmill, laser therapy unit, or full clinic buildout can potentially be written off entirely in year one rather than spread over five to seven years under standard MACRS depreciation.

Bonus depreciation remains available in 2026 at 20% for qualifying assets, down from previous years. The strategic question is whether to take aggressive first-year deductions or spread them out over time. If your practice is in a high-revenue growth phase, accelerating depreciation now may save you more than spreading deductions across future years when your income (and tax bracket) could be higher.

• Treatment equipment (tables, modalities, rehab devices): typically 5 to 7 year recovery period under MACRS
• Leasehold improvements (clinic buildout, flooring, partitions): 15 year recovery, but often eligible for Section 179
• Computer systems and EMR hardware: 5 year recovery period
• Office furniture and waiting room furnishings: 7 year recovery period

We review every equipment purchase with our PT clients to determine whether Section 179, bonus depreciation, or standard MACRS produces the best tax outcome for your specific situation.

S-Corp Compensation for PT Practice Owners: Getting Your Salary Right

If you own your physical therapy practice as an S-corp, the salary you pay yourself is one of the most important tax decisions you make each year. Set it too low and the IRS can reclassify your distributions as wages, triggering back payroll taxes plus penalties. Set it too high and you overpay FICA taxes unnecessarily.

The IRS requires S-corp owners who perform services for their business to take a “reasonable salary” before distributing remaining profits. For a physical therapist who treats patients, manages staff, and runs the business, the IRS looks at what a PT in your market would earn as an employee. According to Bureau of Labor Statistics data, physical therapists in the Dallas-Fort Worth area earn a median salary in the range of $95,000 to $105,000. Your reasonable compensation should reflect your specific duties, hours, and experience.

Here is where the savings come in: salary is subject to the full 15.3% in Social Security and Medicare taxes (split between employer and employee portions). Distributions above your reasonable salary are not subject to FICA. For a PT practice netting $250,000, the difference between a $100,000 salary and a $200,000 salary means roughly $15,000 in annual payroll tax savings. But it has to be defensible.

We help our physical therapist clients document their reasonable compensation with supporting market data, so the number holds up if the IRS ever questions it. This is not about being aggressive. It is about being precise and well-documented.

Telehealth and Multistate Tax Exposure for Physical Therapists

If you provide telehealth PT services to patients located outside Texas, you may have created tax obligations in those states without realizing it. Many physical therapists expanded virtual offerings in recent years, and even a handful of out-of-state patients can trigger nexus, meaning a filing requirement in that state.

Texas has no state income tax, which is a significant advantage for your practice. But if you treat patients virtually in states like California, New York, or Illinois, those states may require you to file a return and pay income tax on the revenue earned from their residents. Each state sets its own nexus thresholds, and the rules vary widely.

We review your patient base and telehealth revenue to identify any multistate exposure before it becomes a compliance problem. For most Dallas-area PT practices with limited out-of-state telehealth, the exposure may be minimal. But it is far better to know where you stand than to receive a notice from another state’s tax authority two years later.

Physical Therapist Tax Mistakes We Fix

After 30 years of working with small business owners, we see the same costly mistakes from PT practices that switched to us from other CPAs or from doing their own books:

• Mixing personal and practice expenses: Using one bank account for everything makes it nearly impossible to substantiate deductions during an audit. We set up clean, separated accounting from day one.
• Failing to track continuing education deductions: APTA conferences, CEU courses, specialty certifications, and related travel are deductible business expenses. Many PTs forget to track these throughout the year and leave hundreds or thousands on the table.
• Ignoring Texas Franchise Tax obligations: Every Texas LLC and S-corp must file the annual Franchise Tax Report and Public Information Report with the Texas Comptroller. Missing the May 15 deadline results in penalties and can jeopardize your entity’s good standing. We handle this filing for $250 to $500 annually.
• Overpaying self-employment tax as a sole proprietor: Many PT practice owners operate as sole proprietors or single-member LLCs taxed as disregarded entities, paying 15.3% self-employment tax on all net income. An S-corp election, when the numbers justify it, can save $10,000 or more per year.
• Not reconciling insurance reimbursements against billed amounts: Without monthly reconciliation, you lose track of denied claims, underpayments, and aging receivables. This is not just a tax issue. It directly impacts your cash flow and profitability.

What Our Physical Therapy Clients Get