Telehealth services have become increasingly important as they offer practical and convenient solutions for those who can’t visit healthcare facilities in person. Not only have they proven effective in managing short-term and chronic conditions, but telehealth services also reduce travel time and costs, making it a popular option for many.
Does your healthcare facility offer telehealth services? Or, have you been considering adding digital consults to your practice portfolio? Our CPAs take a closer look at the tax implications and financial advantages.
Understanding Telehealth Tax Implications
Digital communication technologies are key to providing healthcare services remotely. This offers healthcare providers various opportunities to cash in on relevant deductions and credits. However, for tax purposes, it’s important to properly register and specify these services. There are also several tax considerations, to take into account.
Income tax considerations
As with any industry, income translates to tax. As a telehealth provider, you are liable for taxes on the revenue your services generate. However, there are opportunities to reduce this liability.
Deductions can include costs directly associated with telehealth services, such as technology, software, and communication tools. Additionally, home office expenses, if you operate telehealth services from your home, can also be deducted. This includes a portion of your rent or mortgage, utilities, and maintenance costs. Accurate records are crucial to justify these deductions.
Furthermore, the structure of your business entity – whether you offer telehealth services as a sole proprietor, partnership, or corporation – can significantly impact overall tax liability. This is because each structure has different tax implications and benefits. For instance, corporations may be eligible for certain tax credits and have different deduction limits compared to sole proprietorships. Consulting with a CPA can help you determine the set-up that would be most beneficial for you.
Sales tax considerations
Sales tax considerations vary significantly depending on the state in which you operate. And, as a result of the nature of your services, you can consult with patients across different states. However, this will trigger a multi-state sales nexus. This simply means that your tax submissions become a lot more complicated, not necessarily more expensive. This is because while some states may require sales taxes for services rendered to residents of their state, others may exempt sales tax. Therefore it is important to understand state-specific regulations and carefully consider them when offering telehealth services in that region.
Consider the following in this regard:
- Review state-specific tax laws of the states in which you operate. Note that some states offer exemptions or reduced rates for certain types of healthcare services – capitalize on these.
- If your services are taxable in a state, you must register for a sales tax permit, collect the appropriate amount of sales tax from your patients, and remit these taxes to the state.
- Keep accurate records of all sales transactions, including the amount of sales tax collected.
- Stay informed about changes in state tax laws to help you stay compliant and take advantage of tax benefits that become available.
Incorporating Telehealth into Practice
Are you a traditional healthcare practice considering adding a telehealth offering service to your main business? This involves several strategic steps to ensure smooth implementation and maximum benefits.
- Check that your business is legally compliant. To successfully incorporate telehealth into your practice, you need to obtain necessary licenses including Telehealth-Specific Certifications, Medical Licenses, and if necessary, Drug Enforcement Administration (DEA) Registrations. You also need to ensure that you have strong measures in place to protect patient privacy and data in compliance with HIPAA regulations.
- Implement reputable technological infrastructure. If you offer digital services it is advisable to invest in the necessary technological infrastructure to support your business. You also need to ensure that your technology solutions are user-friendly.
- Ensure that your staff are trained to offer their service digitally. Implement training to ensure that all medical professionals are trained in using telehealth technology to effectively assist patients.
How telehealth typically impacts a practice’s revenue and expenses
Understanding the impact of incorporating telehealth into your practice is key to maximizing its benefits. Here are some key aspects to consider:
- You can reduce your overheads. By offering telehealth services, you can reduce overhead costs associated with maintaining a physical office space or scaling down. This includes savings on utilities, office supplies, and maintenance costs.
- You can reach a broader base of patients. You can boost your revenue potential as you access an expanded range of clients.
- You can benefit from your technology investment. While there are initial investments required for telehealth technology, such as purchasing software and upgrading internet infrastructure, these costs are often offset by the long-term benefits that include the fact that they are often considered tax deductible.
Partner with a Fusion CPA
While there are obvious benefits to incorporating telehealth into your practice, navigating taxes can be challenging. From adhering to state-specific regulations to ensuring operational compliance, streamlining your telehealth business and avoiding penalties might require dedicated expertise.
Maintaining accurate records of telehealth-related expenses and filing taxes in accordance with relevant laws and regulations are essential for maximizing tax benefits and staying compliant.
At Fusion CPA, we can help you determine states with favorable tax laws for your services and maximize expenses that are eligible for tax deductions. Contact us for help today!
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This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. We base articles on current or proposed tax rules at the time of writing and do not update older posts for tax rule changes. We expressly disclaim all liability regarding actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.