- Alaska
What Do Therapists Need to Know About Taxes in Alaska?
Alaska may seem simple — no personal income tax and no state-level sales tax — but there are still state and local requirements that private practice therapists need to keep up with. This guide breaks down what matters when it comes to taxes and business structure in Alaska.
Who this guide is for
This guide is for:
- Licensed Alaska therapists (LPCs, LCSWs, psychologists, etc.)
- Solo or group practice owners
- Providers offering in-person, remote, or hybrid sessions
- Therapists who want to avoid surprises and run a clean, compliant business
Step 1: Pick the right structure for your practice
Entity structure affects liability, tax filings, and administrative requirements.
Sole Proprietorship
- No legal separation from your personal assets
- Easy to start — no state registration required unless using a DBA
- All profits taxed on your federal return
- No state income tax in Alaska
PLLC (Professional LLC)
- Alaska allows licensed professionals to form PLLCs
- Offers personal liability protection
- Default taxation: pass-through (same as sole prop)
- Can elect S Corp status once income grows
- File Articles of Organization with the Division of Corporations
S Corporation
- Allows you to reduce self-employment tax by splitting salary and distributions
- Requires payroll, corporate compliance, and bookkeeping
- Worth considering when net income exceeds ~$75K
- No state corporate income tax for S Corps operating as pass-through entities
Professional Corporation (PC)
- Allowed in Alaska
- Can elect S Corp treatment
- More formal admin structure — typically used in larger practices
Step 2: Know your state tax obligations
No personal income tax
- Alaska does not tax individual income
- Federal income tax still applies
- All tax planning is based on federal law only
No state sales tax — but…
- Many local municipalities (e.g., Anchorage, Juneau, Wasilla) charge a local sales tax
- Rates and rules vary, and therapists may need to collect sales tax on non-healthcare services like coaching, classes, or consulting
- Register with your local government if applicable
Business license
- Alaska requires a state business license for all entities, including sole proprietors
- $50 per year, renewable annually
- Apply through the Alaska Department of Commerce
Biennial report
- PLLCs and PCs must file a report every two years
- Filed with the Division of Corporations
- $100 filing fee
Step 3: Pay taxes throughout the year — not just in April
Estimated taxes
- No state income tax, but you must pay federal estimates
- Required if you expect to owe $1,000+ to the IRS
- Due: April 15, June 15, Sept 15, Jan 15
- Use EFTPS or IRS Form 1040-ES
Self-employment tax
- Applies to net income from sole props and PLLCs
- 15.3% for Social Security and Medicare
- S Corp structure helps reduce this — only your W-2 salary is taxed
Filing requirements
- Sole prop: Schedule C (federal only)
- PLLC: Biennial report + federal personal return
- S Corp: 1120-S + W-2 filings + biennial report
Step 4: Track and claim your deductions
Every deduction you track helps reduce your federal tax bill.
Deductible expenses for therapists
- HIPAA-compliant EHR and telehealth platforms
- Office rent or home office
- Liability and malpractice insurance
- CEUs, licensing, supervision
- Internet, phone, and business software
- Marketing and directory listings
- Retirement contributions (Solo 401k or SEP IRA)
- Health insurance premiums (if self-employed)
Step 5: When it’s time to consider an S Corp
An S Corp can reduce your tax bill when your income justifies the extra work.
S Corp
- Pay yourself a salary through payroll
- Take remaining income as distributions
- Reduces self-employment tax
- Still must run payroll and file corporate returns
- Usually makes sense when net income is $75K+
Step 6: Common mistakes therapists make
- Not renewing the Alaska state business license
- Forgetting to check for local sales tax obligations
- Skipping biennial report filing
- Electing S Corp but not running payroll
- Failing to make federal estimated tax payments
- Not separating personal and business finances
Step 7: Our recommendations by income level
Net Income Range Suggested Action
Under $50K Sole prop or PLLC; get state license; track all expenses
$50K–$100K Consider S Corp election; watch for local taxes; start payroll
Over $100K Use full S Corp setup; max out retirement; review with CPA quarterly
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.
Need help figuring this out?
We help Alaska therapists simplify their federal taxes, choose the right business structure, and avoid local compliance issues before they become problems.
Book a consult or email us at david@leichtercpa.com